Can Firms Learn to Acquire?

We study in this paper how post-acquisition decisions and learning from previous acquisition experience affect the long-term performance of acquiring firms. Using financial and survey data, we investigate empirically the post-acquisition long-term performance of 47 US bank holding companies that executed 320 acquisitions in the 1986-1995 period and compare it with benchmark portfolios performance. We find that prior acquisition experience per se does not improve post-acquisition performance, but codification of this experience in ad-hoc tools significantly affects long-term performance. Furthermore, a high level of integration of the target within the acquirer’s organization improves long-term performance, whereas the replacement of top management worsens it. Also, increasing levels of integration enhance the positive impact of knowledge codification processes. Finally, experiential and deliberate learning are substitutive mechanisms for learning, rather than complements.