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Abstract
In traditional literature on mergers and acquisitions (M&As), the reasons to merge or acquire are largely described as strategies of the merging
or acquiring parties. This article suggests that M&As are contextually driven. Based on six case studies, the article pinpoints how M&As among
customers lead to M&As among suppliers, and vice versa. The article launches the concept of parallel M&As to describe this phenomenon, and
asks the following question: in what ways are M&As among customers and suppliers a driving force for M&As by the other party? Matching,
dependence and keeping a power balance are found as key explanations for parallel M&As.
© 2006 Elsevier Inc. All rights reserved.
1. Introduction the M&As in the automotive industry and the IT-sector in the
late 1990s, for example.
Mapping completed mergers and acquisitions (M&As) over Motives for M&As as referred to in most literature describe
the past few decades would produce a line which roughly M&As as ways to predominately reach additional market shares
follows the fluctuations of the business cycle. The numerous (Sevenius, 2003) or synergies (Walter and Barney, 1990; Porter,
M&As occurring in the late 1990s and in early 2000 mark the 1998; Schmitz and Sliwka, 2001; Ansoff, 1984). Such motives
most recent peak (Bengtsson and Skärvad, 2001; Weston and indicate that M&As are means to realise the strategies of the
Weaver, 2001), which was followed by a recession starting in acquiring or merging parties. Discussing M&A motives from
late 2000 (Sevenius, 2003; Lundell, 2002; KPMG Corporate other perspectives adds additional dimensions to the picture:
Finance, 2003; Förvärv & fusioner, 2004). Weston and Weaver agency theory (Kesner et al., 1994), hubris (Weston and
(2001) describe this development as M&A waves, and refer to Weaver, 2001; Berkovich and Narayanan, 1993; Roll, 1986;
the most recent peak of mergers and acquisitions as the fifth Gupta et al., 1997; Seth et al., 2000) and empire building
M&A wave. Different peaks in the history of M&As have had (Trautwein, 1990) indicate the existence of a second agenda for
different foci. In the 1960s and 1970s, diversification and the M&As. Still, these reasons to merge or acquire do not explain
creation of conglomerates were common reasons for merging why M&As appear in waves; nor do they explain why certain
with or acquiring other companies (Shleifer and Vishny, in industries undergo periods of intense M&A activities. To
Rumelt et al., 1994; Weston and Weaver, 2001). In the age of explain M&A waves, changes in tax and competition legislation
economic globalisation, the M&As of the late 1990s and early are sometimes referred to (Erixon, 1988; Rydén, 1971). De-
2000 were more international in scope, involving companies regulation could also explain to some extent the M&A intensity
from more than one country; their focus was also more to bring in certain industries (see e.g., the banking sector). Legislation
intra-industry companies together (Bengtsson and Skärvad, and deregulation are contextually driven reasons to merge or
2001; Sevenius, 2003). This intra-industry focus could describe acquire, rather than results of strategies within the companies
involved. Context is thus acknowledged as a driving force for
⁎ Corresponding author. Tel.: +46 13 28 25 06; fax: +46 13 28 18 73.
M&As.
E-mail addresses: christina.oberg@eki.liu.se (C. Öberg),
This article focuses on M&As as a driving force for other
johan.holtstrom@eki.liu.se (J. Holtström). M&As. More specifically, our focus is on how M&As among
1
Tel.: +46 13 28 16 14; fax: +46 13 28 18 73. customers lead to M&As among suppliers, and the reverse. We
0148-2963/$ - see front matter © 2006 Elsevier Inc. All rights reserved.
doi:10.1016/j.jbusres.2006.09.015
1268 C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275
launch the concept of parallel M&As to describe this pheno- 3. Customers and suppliers in M&A motives
menon. In contrast to the arguments in Halinen et al. (1999) and
Havila and Salmi (2000), for example, we argue that M&As are The M&A literature gives several examples of motive
not only triggers to change but also responses to change, and taxonomies. Walter and Barney (1990) refer to economics of
further, that these changes need not be directly dyadically scale and scope, interdependence, expansion of product lines or
connected (cf. Hertz, 1998; Havila and Salmi, 2000), but can markets, entrance into new businesses, and maximization and
appear parallel to each other. Unlike the motives presented in utilization of financial capabilities as motives for M&As.
most traditional M&A literature, this further means challenging Trautwein (1990) describes motives in terms of efficiency,
M&As as being only the result of strategies within the acquiring monopoly, raider, valuation, empire-building, process and
or merging companies. Instead we argue that M&As are disturbance theories. Erixon (1988) distinguishes between
contextually driven. monopoly and economies of scale, growth maximization,
spread and reduction of risk, transaction cost, managerial
2. Parallel M&As — A definition competence, taxes and politics, and speculation theory.
Berkovich and Narayanan (1993) and Weston and Weaver
By using the concept parallel M&As, we refer to mergers and (2001) point out three main groups of motives: efficiency or
acquisitions as a response to M&As among customer and/or synergy, hubris and agency problems.
supplier companies. These M&As appear sequentially in time, Some themes are recurrent in the taxonomies of motives.
but parallel with regard to the actors; while customers merge or These are synergies (Ansoff, 1965) through economics of scale or
acquire, so do their suppliers (see Fig. 1). These parallel M&As efficiency, growth (Penrose, 1959) to possibly reach monopoly
may either be intra-industry responses, where customers and (Tombak, 2002) or add market shares (Sevenius, 2003), and
suppliers act within the same industry, or responses to M&As diversification to reduce risk (Goldberg, 1983). Other motives
among customers or suppliers in separate industries. The include personal reasons (hubris; Roll, 1986, or empire-building;
particularity of parallel M&As includes an existing customer– Trautwein, 1990; Sudarsanam, 1995) and legislatively driven
supplier relationship between at least one party in each of the motives (Erixon, 1988; Rydén, 1971). Apart from legislatively
two parallel M&As. In contrast to vertical integration (e.g., driven motives; the message is largely that the merging or
Bjuggren, 1985; Chatterjee, 1991), the customer–supplier acquiring parties ‘lead the actions’. As Sudarsanam (1995:13)
relationship remains external following the M&A. M&As expresses it: “Acquisition motives may be defined in terms of the
appearing in these patterns introduce new ideas as to why acquirer's corporate and business strategy objectives”.
companies merge or acquire, and a new angle on contextually Research in the area of M&As focuses on the merging
driven M&As, where legislation and deregulation do not seem companies (Anderson et al., 2003), rather than considering
to provide enough explanation. The purpose of this article is to M&As as activities which influence and are influenced by the
discuss the phenomenon of parallel M&As and to explore in context in which they take place. Customers and suppliers are
what ways M&As among customers lead to M&As among largely (i) ignored or only dealt with indirectly (Anderson et al.,
suppliers, and the reverse. 2003; Öberg and Anderson, 2002), or (ii) are referred to as one
This article has the following structure: (i) a discussion of the of the parties in the M&A.
role of customers and suppliers in traditional M&A motives, (ii) When the motives driving M&As are market shares and
M&As in a network perspective, (iii) research method, (iv) a synergies, there is an indirect customer or supplier dimension;
description of parallel M&As built on examples from six case adding market shares implies a possible transfer of a customer
studies, and (v) a concluding discussion. base, and cost synergies could indicate changes affecting
suppliers. Common for this indirect treatment is that the
interplay with customers and suppliers is regarded as maneu-
verable by the acquiring or merging parties; these motives do
not acknowledge possible customer and supplier reactions.
Moreover, they do not acknowledge that activities among
customers and suppliers are a driving force for M&As.
Motives for M&As which are related to risk management and
control (Goldberg, 1983) target a dependence on others. A
resource dependence view (Pfeffer, 1972; Finkelstein, 1997) of
M&As acknowledges the interconnectedness between compa-
nies. The focus however remains on the interdependence
between the acquired and the acquiring companies, where one
alternative is to acquire former customers or suppliers. In this
sense, M&As could be considered as an alternative to co-
ordination through market transactions and co-ordination
through cooperation. More specifically, we could describe
M&As as a transfer from co-ordination through cooperation or
Fig. 1. The phenomenon of parallel M&As. market transactions to co-ordination through direction/hierarchy
C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275 1269
(cf. Richardson, 1972; Thompson et al., 1993). Accordingly, customers and supplier in mergers and acquisitions. We chose
M&As would either mean entering a new stage in the the case study approach (Yin, 1994; Eisenhardt, 1989; Halinen
development of a relationship, or be an alternative to other co- and Törnroos, 2005) to capture various aspects of customer and
ordination activities (e.g., Bengtsson et al., 1998; Chang and supplier relationship that are connected to M&As. Parallel
Rosenzweig, 2001; Larsson, 1993). The implication of consid- M&As were not our research focus per se, but is a result of how
ering M&As as the alternative to (or development of) other co- several interviewees described the motives for their M&As.
ordination activities is that the acquirer and acquired have (had) The cases describe M&As completed from the latter part of
an on-going business relationship instead of (or prior to) the the 1990s to the year 2000, that is, during the so called fifth
merger or acquisition. A second implication is that it is the M&A wave. They represent various industries including the
parties involved in the (potential) exchange that are involved in process industry (paper industry), service provision (IT-sector),
the M&A. A broader consideration of embeddedness (Grano- high-tech (defence industry) and traditional manufacturing
vetter, 1985) is largely disregarded. In the case of parallel (material handling equipment, automotive industry and ma-
M&As, the customer–supplier relationship persists as an inter- chinery equipment). The industries differ in maturity; the IT-
company (or inter-group) relationship even after the M&A. sector represented an expanding industry at the time, while
Instead of acquiring a customer or supplier company, the material handling equipment, the automotive industry and the
acquirer focuses its attention on acquiring (possible) competi- paper industry are examples of mature industries, and the
tors. The merging companies are driven to this by M&As among machinery equipment and defence industry cases refer to
their customers and/or suppliers. declining industries. In the case study industries, the M&A
Consequently, when the M&A literature refers to customers activities were intense during the fifth M&A wave. Common to
or suppliers, this is either done indirectly and in terms of the chosen cases is the fact that the M&As were intra-industrial,
relationships which are tradable or manageable by the merging that is, the target and acquirer were both active in the same
parties, or through referring to customers and suppliers as one of industry. Four of the cases (BT Industries, Stora Enso, Johnson
the parties in the M&A. The literature does not recognise that Motor–Lux and Alfa–Beta) describe cross-border M&As and
the actions of customers and suppliers are a driving force to the other two describe domestic M&As. Intra-industry and
merge or acquire. As we shall see from the cases presented in cross-border M&As were characteristics of the fifth M&A
this article, the companies studied claimed that M&As among wave.
customers and suppliers were reasons for their M&As. This The studies of BT Industries and Technology Nexus AB
indicates a specific situation of contextually driven M&As. were partly reported on in Öberg (2004), whereas the studies of
Stora Enso, Johnson Motor-Lux, Alfa–Beta and Saab–Celsius
4. A network approach to M&As were presented in Holtström (2003). Öberg (2004) focused on
customers in M&As, whereas Holtström (2003) studied the
In the network approach (e.g., Håkansson and Snehota, 1989; interplay between the merging companies and their suppliers.
Mattsson, 1996; Gadde and Mattsson, 1987; Axelsson, 1992), Data come from interviews with various company repre-
M&As have lately been given increased attention (e.g., Anderson sentatives (including CEOs, sales and procurement managers)
et al., 2001, 2000; Havila and Salmi, 2000). M&As are regarded of the acquiring and/or acquired companies, their customers
as a mode to increase competitiveness (Hägg and Johanson, and/or suppliers. Representatives from a total of nineteen
1982), but also as an activity which jeopardise existing business different customer or supplier companies were interviewed. The
relationships (Anderson et al., 2001). In this latter respect M&As data for the different case studies were collected between 1999
are referred to as a trigger to change (Halinen et al., 1999; Havila and 2005. The interviews, which were conducted in order to
and Salmi, 2000, 2002; Salmi et al., 2001). These authors show
how an M&A may cause changes in the network. In this part of
the literature, the focus is on the effects of M&As rather than on Table 1
The cases
the motives to merge or acquire. With parallel M&As we describe
a situation where M&As are seen as a response to other M&As, Casea Industry No. of M&Asb No. of interviews
rather than as the trigger to change. This means that the M&As BT Industries Material handling 3 32
carried out by others become a motive or driving force to merge or equipment
Technology Nexus IT-sector 1 5
acquire. When the network approach literature describes spread of
AB
change following an M&A, additional M&As may be part of the Stora Enso Paper industry 1 4
scenery. The reason why these M&As occur is however not Johnson Automotive industry 1 6
elaborated on. It is therefore relevant to ask: in what ways are Motor–Lux
M&As among customers and suppliers a driving force for Alfa–Beta Machinery 1 3
equipment
M&As?
Saab–Celsius Defence industry 1 3
a
5. Research method The Johnson Motor–Lux and the Alfa–Beta cases have been anonymised
for reasons of confidentiality.
b
The M&As referred to are M&As where the company in focus is the
The empirical data in this article comes from six case studies acquirer or target. M&As among customers and suppliers are not included in the
(see Table 1). These case studies are part of a research project on table.
1270 C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275
explore and create an understanding of the M&A and the issues Yale). In the late 1990s, BT Industries acquired Raymond and
of customers and/or suppliers, could be characterised as Cesab. The acquisition of Cesab was conducted in two stages,
qualitative (Starrin and Renck, 1996). Although an interview and simultaneous with the second step, BT Industries itself was
guide was created and adjusted to fit the various interviews; the acquired by Toyota Industries Corporation. The acquisition of
interviews were largely non-standardised and informal (Starrin Raymond allowed BT Industries to expand geographically in
and Renck, 1996) with open-ended questions (Yin, 1994). the US, while the acquisition of Cesab included reaching a
Information drawn from newspaper articles mainly gathered complementary, yet closely related, product range. Toyota's
from AffärsData, a newspaper database, company websites, acquisition meant that a former co-operation partner and
press releases, and annual reports complemented the interviews. competitor became the new owner of BT Industries.
Several interviewees, independent of each other, referred to The customers of BT Industries are found among consumer
M&As among customers and/or suppliers, giving these as the goods and logistics firms; companies that also merged in the
reason for their own M&A. Therefore we have empirically 1990s. These M&As often entailed a globalisation of the
derived the phenomenon of parallel M&As from our research customers' businesses. Companies in the material handling
project. Our interviewees emphasised that M&As among equipment industry considered geographical expansion and
customers and suppliers (cause) were their reason for their completion of product portfolio necessary to keep customers.
own M&As (effect), which means that the chosen method (case This led to acquisitions in the material handling equipment
studies) provides us with proof of a casual connection between industry. BT Industries' acquisition of Raymond in the US was
the two. Even though we were working with open-ended an answer to the globalisation wave among consumer goods
questions, some of the case studies were completed (e.g., the companies. By increasing their geographical presence through
Johnson Motor–Lux case) before others were initiated (e.g., the M&As, customer companies were expected to increase their
Technology Nexus AB case). The sequential data collection focus on flows of materials. Further, they were expected to want
approach carries similarities with testing initial hypotheses. the same supplier for the entire new organisation. The new
From initial, unstructured observations based on our structure would allow suppliers to deliver to the new customer
empirical data, we made a preliminary analysis of the cases in locations (BT Industries, 2003). Similar M&A patterns could be
order to see how customer and supplier M&As were referred to. found among logistics firms (see e.g., DHL), which in turn were
This analysis confirmed that customer or supplier M&As were driven by the M&As in the consumer goods industry, for
indeed mentioned as driving forces in all our studied cases. To example. This led to additional M&As in the material handling
take the analysis further, we analysed the mention of customer equipment industry. While their customers expanded their
and supplier M&As as driving forces in more depth, asking in businesses, BT Industries and other companies in the business
what ways parallel M&As were referred to. From this second of material handling equipment strove to keep pace with them
stage of the analysis, we were able to distinguish three different and M&As were one way to do so. The aim of the new M&As
categories of underlying driving forces (matching, power- was to match the new customer company groups, as the
balance and dependence) which led to parallel M&As. We customers' M&As meant new challenges for the companies in
reflect on resemblances between the different cases according to the material handling equipment industry. Although material
these categories in the latter part of this article. handling equipment, a mature industry, saw new possibilities in
this increased focus on material handling, they also experienced
6. Parallel M&As — An empirical phenomenon keen competition.
The case studies represent six different industries. Common 6.2. Technology Nexus AB
to these industries is the fact that they all underwent an intra-
industry M&A wave in the late 1990s to 2000. In some Technology Nexus AB is a Swedish IT-company specialising
industries this resulted in a high level of company concentration in IT-security solutions. During the past ten years, a time
(e.g., in the paper industry), whereas other industries remained marked by numerous acquisitions in the IT-sector, the company
fragmented following the M&A wave (e.g., the IT-sector).
Parallel to these intra-industry M&As, a pattern of M&As
among customers or suppliers could be seen. Some of these Table 2
parallel M&As were carried out among customers or suppliers Customers and suppliers in the parallel M&As
that belonged to the same industry as the M&A under study; Supplier/type of suppliers Customer/type of customers
whereas others were inter-industry relationships (see Table 2). BT Industries/material handling Various industries, e.g., consumer goods and
equipment logistics firms
6.1. BT Industries Technology Nexus AB/IT-sector Various industries e.g., banking
Raw material/forest and paper Stora Enso/paper industry
industry
The BT Industries case deals with three acquisitions in the Paper machines
material handling equipment industry, an industry where many Parts and raw material Johnson Motor–Lux/automotive industry
companies have merged or acquired during the past fifteen years Consulting
(e.g., Linde's acquisition of Still, Jungheinrich's acquisition of Components and raw materials Alfa–Beta/machinery equipment industry
Components and prototypes Saab–Celsius/defence industry
Steinbock and Boss and Nacco's acquisition of Hyster and
C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275 1271
has acquired several companies (e.g., the Devenator Group and the stronger party, enforcing price reductions, and (ii) the need
the assets of Verimation/Netsys). for matching in size; with larger customers, the suppliers'
The customers of Technology Nexus AB include, for capacity quota needed to be enlarged as well.
example, companies in the banking sector; a sector marked by
an M&A wave in the 1990s (Konkurrensverket, 2002). 6.4. Johnson Motor–Lux
Deregulation of the banking sector enabled these activities.
M&As among customers were referred to as a driving force for The automotive industry case describes Johnson Motor's
Technology Nexus AB to acquire companies; as customer acquisition of Lux, another car manufacturer. This acquisition
companies consolidated their businesses, their IT-projects grew was conducted in the late 1990s, simultaneous with several
larger in size, which in turn required a larger capacity from the other M&As in the automotive industry. The M&A wave among
suppliers of IT-services. Furthermore, as several customers car manufacturers spread to several of their suppliers. To
centralised their purchasing the preference of buying more from exemplify, Industrial Plastics, who supplied Lux with painted
fewer suppliers became a trend. These circumstances empha- bumpers and dashboards, acquired Bumper Inc. in 1998.
sised that suppliers needed to match their customers in size and Merging car manufacturers renegotiated deals and re-evaluated
capacity. As in the case of BT Industries, the adjustments to their supplier base, which put pressure on their suppliers.
customers' new conditions and the risk of losing existing Industrial Plastics experienced this and met the new situation
customers to competitors following M&As among customers, through acquiring Bumper Inc. As the suppliers merged, some
led even in the IT sector to M&As among suppliers. of them grew larger than the car manufacturers and attained a
dominating position towards the car manufacturers. This in turn
6.3. Stora Enso led to further M&As among car manufacturers. A circular
cause-and-effect pattern of M&As could thus be seen between
Stora and Enso were actors in the forest and paper industries. suppliers and car manufacturers, where the imbalance in power
Stora was one of the major players on the Swedish market and shifted between the car manufacturers and their suppliers.
Enso on the Finnish. In June 1998, these two companies Whereas the suppliers of components were squeezed through
announced their merger. This merger was one of several in an the increasing power of the car manufacturers and merged to
ongoing restructuring process in the paper industry. As the paper overcome this, consultants to the car manufacturers experienced
producing companies grew larger, their negotiation power another effect of the car manufacturers' M&As. Specialised
increased and consequently the M&As created an imbalance in Consultant, for example, an independent consultant to Lux, was
power between customers and suppliers. Merging paper contacted by companies providing consultant services to Johnson
producing companies were able to pressure predominately Motor. These consultants expressed their wish to acquire or co-
suppliers of raw material for lower prices. This pressure was a operate with Specialised Consultant; they wished to establish
result of attempts to realise synergies following the M&As relationships with Lux in order to become consultants to both Lux
among the paper producing companies. and Johnson Motor. These consultant companies stressed the
To meet the price pressure, suppliers of raw material merged local market presence, but also the need to match in size and
their businesses as well. The M&As, which had been initially capacity. The consultants felt the risk that they would not be
driven by the paper producing companies resulted in them contacted unless they adjusted to their suppliers. As a result, an
experiencing a situation of increased dependence as their acquisition wave swept the consultancy sector in the latter part of
suppliers merged. This left the paper producers with fewer the 1990s. The demand for deeper engagement and broader
alternatives. The paper producing companies faced a situation of competence on the part of the car companies powered this wave;
decreasing power, which created an M&A circle; the M&A car manufacturers did not contact small consultant companies as
pendulum had swung back to the paper producing companies, these lacked the required capacity.
resulting in new M&As.
A second consequence of the M&As among paper producing 6.5. Alfa–Beta
companies could be seen among suppliers of paper machinery.
The increased size of the paper producing companies created a In the late 1990s, Alfa acquired Beta, a former competitor.
need for matching in size; as the paper producers merged, paper Alfa and Beta were both companies producing machine
machinery suppliers felt that they needed to merge so the paper equipment for the domestic industries in their respective
producers would not turn elsewhere. countries of origin (Sweden and Finland). The machine
Between the paper producing companies and the suppliers of equipment industry was undergoing a recession at this time.
raw material a circular driving force could be seen; the initial As a consequence, there was an ongoing restructuring process
M&As among the paper producing companies led to M&As within the industry on parallel levels, which also involved
among suppliers. These M&As in turn affected the paper suppliers. One of the main suppliers of Alfa was Gamma; a
producing companies. In the case of the paper machine supplier of components. Gamma acquired Theta in the late
manufacturers, the direction seems to be unilateral and M&As 1990s. This acquisition was driven by an increased dependence
among paper producing companies only spread to the paper on customers (the actors producing machine equipment), which
machine manufacturers. The reasons for these different M&As in turn was a consequence of the restructuring process of the
were (i) that the customers (i.e., the paper producers) became machine equipment industry. The dependence on customers
1272 C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275
consequently caused parallel M&As among customers and The cases this article present all exemplify M&As among
suppliers. As in the case of Stora Enso and Johnson Motor–Lux, customers or suppliers as a driving force to merge or acquire.
these parallel M&As continued; M&As among suppliers made This implies a spread of M&As to and from business partners,
the suppliers rather strong as the customers experienced a leading to M&As as a response to other M&As. Through
limitation in their choices of suppliers and as OEM agreements describing M&As among business partners as a driving force
constrained the possible choice of suppliers. for M&As, we reverse the arguments found in Halinen et al.
(1999) and Havila and Salmi (2000), who focus on effects of
6.6. Saab–Celsius M&As. We further indicate a specific case where M&As are a
response to M&As, rather than describing the spread of change
Saab and Celsius were actors in the defence industry. In 2000, more generally. In our cases a recurrent theme is that M&As are
Saab acquired Celsius. At this time, the defence industry was a driving force for new M&As, which we consider provides
experiencing a major recession and also several M&As. For evidence for the existence of parallel M&As. Through using
example, British Aerospace acquired Marconi Electronic Systems case studies as a method, we are also able to show a cause and
the year before Saab's acquisition of Celsius. These M&As were effect pattern. But, in what ways are M&As among customers
driven by an ongoing M&A wave among suppliers to the defence and suppliers a driving force for M&As? Table 3 summarises
industry companies. As the suppliers merged, suppliers were the reasons referred to in the respective cases. Three categories
created that were larger than the defence industry companies, thus can be found: (i) matching, (ii) power balance, and (iii)
leaving the companies within the defence industry with fewer dependence.
supplier choices. The dependency on the suppliers increased,
causing M&As among defence industry companies. 7.1. Matching
Secondly, and as a consequence of the recession in the
defence industry, suppliers refocused their businesses, broad- BT Industries, Technology Nexus AB, the companies
ening them in scope through conducting M&As. One such producing paper machinery for Stora Enso, and the providers
example is Elimag, one of Saab's suppliers. Elimag grew of consultancy services in the Johnson Motor–Lux case, all
through acquisitions and broadened its product portfolio to refer to matching with regard to geographical presence, size/
include products for the defence, telecom, aerospace and capacity or capability. The suppliers tried to enlarge their
medical industries. In this case, dependence on the other party businesses through M&As to match their merging customers.
was a driving force for parallel M&As. Common to these companies is that they all supply supporting
products or services to their customers (material handling
7. Discussion equipment, IT-services/-programmes, machinery for paper
production, and consultancy). There seems to be an assumption
In this article we have described the phenomenon of M&As among these suppliers that either they meet their customers'
as a response to M&As among customer and/or supplier needs – geographically, in size/capacity or capability – or they
companies. We named this phenomenon parallel M&As. The
literature on M&A motives mainly describes the reasons to
merge or acquire as strategies on the side of the merging or Table 3
acquiring party; the acquirer is depicted as the company Categories of driving forces for the parallel M&As
“leading the actions”; and the M&A is driven by either the Case Reasons for parallel M&A Category
interest of shareholders (creation of shareholders' value; e.g., BT Industries Globalisation among customers (Geographical)
Copeland et al., 2000) or managers (possible agency problems). leading to an increased need matching
M&As as a contextually driven phenomenon has only been for material handling; larger
geographical scope
given limited space in the literature and when contextual driving
Technology Larger projects per Matching (in
forces are included, reference is commonly made to how Nexus AB customer; changed size)
changes in legislation (or deregulation) affect the M&A climate. buying patterns: more from
The emphasis of parallel M&As is placed on M&As among fewer suppliers
customers and suppliers as driving forces to merge or acquire. Stora Enso Paper producing companies Power balance
becoming a stronger negotiation
This strongly acknowledges the context – here represented by
partner with suppliers,
customers and suppliers – as a driving force for M&As. With leading to price pressure
examples from a wide range of industries, we target a Demand for capacity and Matching (in
phenomenon of companies that describe their M&A activities capability from suppliers size)
as responses to M&As among customers and suppliers. As of paper machinery
Johnson Pressure on suppliers Power balance
described in this article, the phenomenon observed does not
Motor–Lux Suppliers became dominant
concern vertical integration between customers and suppliers, A perceived need for larger Matching
but a situation where customers merge or acquire “on their side” capacity by consultancy suppliers
parallel to their suppliers' merging or acquiring. The concept Alfa–Beta Recession in industry; dependence on Dependence
includes possible circular effects, where M&As continuously customers
Saab–Celsius Recession in industry; suppliers diversified Dependence
lead to more M&As among customers and suppliers.
C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275 1273
risk losing their existing customers. To summarise the category recession in the respective industries. Dependence as a motive
of matching, the following driving forces are highlighted: for M&As can be found in the resource dependence literature
(e.g., Pfeffer, 1972; Finkelstein, 1997; Pfeffer and Salancik,
○ Global presence considered necessary as a response to 1978). As described previously, it is common according to this
globalisation among customer companies. literature for the company to acquire the party upon which it is
○ A need for larger supplier capacity to meet their customers' dependent. The concept of parallel M&As implies something
increased size. else, that instead other companies are acquired to deal with the
○ Larger customers meant a need for larger capacity and dependence. In the Saab–Celsius case, diversification is
capability in order to compete for projects on the same level referred to; dependence when the choices were limited led to
as previously. a re-direction of company focus, that is, an “escape plan” rather
than a plan to acquire the other party. Through M&As, suppliers
In theoretical terms, matching indicates a voluntarily attempt diversified their businesses into related fields (see Elimag in the
to keep a business partner. The adjustment to existing business Saab–Celsius case description). The dependence driving force
partners can be found, for example, in the network approach can be summarised as follows:
(see e.g., Hallén et al., 1991; Håkansson and Östberg, 1975;
Håkansson and Snehota, 1989). Whereas the network approach ○ M&As spread following an increased dependence on the
largely targets mutual adjustment of companies (Ford, 1980), other party. In combination with an industry recession,
our reference to matching indicates a one-sided adjustment; the M&As were performed, for example, to broaden the
suppliers adjust to their customers, and this is done in order to business scope.
keep their customers. The actions of customers on the other
hand are not resulting from the suppliers' actions. 7.4. Order of occurrence?
7.2. “Power-balance” Fig. 1 illustrates how the M&As occur in the direction
customers to suppliers, and the reverse suppliers to customers.
A second underlying driving force for parallel M&As is what This could also be seen in the cases, for example, in the BT
is referred to in Table 3 as “power-balance”. This can be seen in Industries case, M&As among customers are referred to,
the case of Stora Enso (with regard to the suppliers of raw whereas the Johnson Motor–Lux case refers to suppliers'
material) and in the Johnson Motor–Lux case (with regard to M&A activities as reason for the continuous M&As among the
suppliers of components). Common to both these cases is a high car manufacturers.
level of company concentration in the respective industries as a Without generalising beyond the cases, the most common
consequence of M&As. The pressure put on the suppliers led in initial driving force for parallel M&As is when customers merge
turn to these merging or acquiring other companies. In the case or acquire. In other words, M&As among the customers precede
of Stora Enso, for example, the price pressure on suppliers those of the suppliers. The cases presented in this article further
created M&As among them. In both cases (Stora Enso and indicate that the order of occurrence is bilateral between
Johnson Motor–Lux), the power-balance struggle continued, customers and suppliers acting in the same or vertically related
leading to additional M&As both on the customer side and industries. Following an initial M&A, the M&A pendulum
supplier side. In the case of Johnson Motor–Lux, the power swings back and forth between the customers and suppliers.
pendulum indicates a present imbalance, where the suppliers are This phenomenon was seen in the Stora Enso and the Johnson
the stronger party. The following statements summarise the Motor–Lux cases, for example. When it comes to suppliers of
drive to gain a power-balance: supporting products or services (e.g., suppliers providing paper
machinery in the Stora Enso case, BT Industries providing
○ M&As created an imbalance in negotiation power, in which material handling equipment, Technology Nexus AB as IT-
the stronger party took advantage of its stronger position. provider, and Specialised Consultant supplying Lux with
○ A continuous struggle to become the stronger party (or consultancy services), the order of occurrence seems to be
regain balance) led to additional M&As on both sides. unilateral from customers to suppliers. These latter cases do not
seem to indicate that M&As among suppliers lead to continuous
Power-balance, or coping with imbalance, resembles power M&As among their customers.
and conflict, as referred to by Casciaro and Piskorski (2005),
Patterson (1969), Etgar (1976) and Emerson (1962), for 8. Further research
example. In the cases that this article reports, the disequilibrium
between actors forms new M&As. This article presents a phenomenon which indicates that
M&As appear as a response to other M&As, that is, M&As are a
7.3. Dependence driving force for other M&As, thus making them “contagious”.
Through describing the phenomenon with examples from six
The third driving force is dependence. The cases of Alfa– case studies, we introduced the concept of parallel M&As. The
Beta and Saab–Celsius describe dependence on customers. case studies give some indication of a connection between the
Common to these cases is that the M&As occurred during a industry structure (level of concentration) and industry maturity,
1274 C. Öberg, J. Holtström / Journal of Business Research 59 (2006) 1267–1275
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