The Role of Ambiguity in the Process of Acquisitions

Abstract

This thesis advances the understanding of Mergers and Acquisitions (M&As) by elucidating the origins of ambiguity, unpacking the different types of ambiguity, and exploring the role of ambiguity in M&A failures. It also opens the black box of the effects and outcomes that different types of ambiguity engender, proposing effective management strategies to mitigate its impact and enhance M&A success rates. M&As are strategic decisions leveraged by diversified firms to drive growth. Despite the high volume and value of M&A deals globally, the success rate remains low, with failure rates reported between 70% and 90%1. Ambiguity is identified in the literature as a critical factor that hinders decision-making and integration success in acquisitions. The research utilized the Paradox theory to distinguish between positive and negative ambiguities in M&As. Positive ambiguity supports moving forward with an acquisition, whereas negative ambiguity poses challenges. The principles of ‘Organizational Learning’ were applied to enhance communication between the ‘Acquirer’ and the ‘Target’, while the Information-Gap theory of Feelings underscored the importance of recognizing and managing ambiguities by systematically identifying and addressing them. The methodology began with a comprehensive literature review to establish a theoretical framework, followed by two case studies using ethnographic techniques (involving interviews and observations) and targeted grounded theory to develop initial insights. Semi-structured interviews were conducted for validation, with findings compared against existing literature to analyze the role of ambiguity in acquisition failures and propose management strategies. The research highlighted that ambiguities between the Acquirer and the Target often have a paradoxical nature, creating tensions that can impede integration success. Key practical implications include the importance of managing positive ambiguities to facilitate progress and reducing negative ambiguities through open discussions on shared goals and risks. Additionally, the study found that imbalances in top-down and bottom-up communication and learning during M&As can be mitigated by engaging mid-level managers to act as communication and learning facilitators. To manage decision-makers' responses to ambiguity, the research proposed practical tools such as a non-partial ambiguity identifier, an ambiguity registry, and a matrix for tracking ambiguities. These tools aim to integrate ambiguity detection and documentation into the acquisition process, fostering a more structured and objective approach to ambiguity management. A key academic contribution of this research is the development of a typology of M&A ambiguities from the literature, categorized into four priority areas: Human Resources (HR) ambiguity, Organizational (O) ambiguity, Process (P) ambiguity, and Goal (G) ambiguity. Both positive and negative ambiguities were found within these categories, providing a framework for managing ambiguity during the integration phase of M&As. This research also offers a practical model for the business world engaged in M&As, demonstrating that effective ambiguity management through structured identification, communication, and strategic alignment can significantly enhance the chances of successful integration.