How does a merger contribute to firm success?

Are successful mergers only geared to wresting efficiencies? Or can there be other considerations that come into play – and ultimately affect a firm’s financial performance? “How Achieving the Dual Goal of Customer Satisfaction and Efficiency in Mergers Affects a Firm’s Long-Term Financial Performance” by Vanitha Swaminathan (University of Pittsburgh), Christopher Groening (Kent State University), Vikas Mittal (Rice University) and Felipe Thomaz (University of Pittsburgh) furthers the literature by exploring the moderating role of mergers towards maximizing long-term firm value.

We are pleased to highlight this recent study comprising 429 observations across multiple firms and industries published in the Journal of Service Research.

Professor Swaminathan graciously provided insights behind the article in her responses below.

•      What inspired you to be interested in this topic?

This paper began by looking at the often repeated assertion that mergers lead to reductions in customer satisfaction. While one may believe this to be the case, there is evidence that customer satisfaction improvements actually increase financial value…which led us to ask the question, would managers wishing to maximize shareholder value reduce their focus on customer satisfaction in a merger? Following this, we wondered if a focus on both customer satisfaction and efficiency improves shareholder value even more in a merger context.

•       Were there findings that were surprising to you?

Contrary to what conventional wisdom regarding mergers and customer satisfaction, we found that a dual emphasis on both customer satisfaction and efficiency improvements will actually benefit firms in a merger context. I think the biggest surprise was our finding that non-merged firms did not significantly benefit from a dual emphasis. In other words, we thought that a merged firm would find greater value in a dual emphasis, but not that a non-merged would find little to none.

•     How do you see this study influencing future research and/or practice?

It will help to go deeper into analyzing why customer satisfaction and efficiency improvements in merger contexts facilitate shareholder value maximization, more so than non-merger settings.  Is it the improved availability of resources, or greater access to more profitable customer groups? Is it due to the creation of new synergies between the merging companies?Addressing these questions will help increase our understanding of when to best implement these typically opposing goals (i.e., efficiency and customer satisfaction improvements) even in non-merger settings.

Read the entire article online in Journal of Service Research free through the end of January, and sign up for e-alerts so you don’t miss out on future issues and articles published in Journal of Service Research.

 

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