Contents

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ixChapter 1 Turmoil in Top Management Teams FollowingMergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . 1Chapter 2 Mergers and Acquisitions . . . . . . . . . . . . . . . . . . . . . . . 17Chapter 3 Top Management Teams . . . . . . . . . . . . . . . . . . . . . . . 29Chapter 4 Do Mergers and Acquisitions Create Value? . . . . . . . . . 41Chapter 5 Why Mergers Fail . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51Chapter 6 Executive Turnover and Postmerger Performance . . . . . 63Chapter 7 Before the Merger: Merger Motivations and Objectives . . 73Chapter 8 After the Merger: Why Executives Stay or Leave . . . . . 87Chapter 9 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Notes

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

References

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123

Index

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Preface

During the mid-1980s, I was a manager at PepsiCo, Inc. PepsiCo’s cor-porate strategy was to build a strong market position in three industry groups: (a) soft drinks, (b) snack foods, and (c) restaurants. PepsiCo’srestaurant division included Kentucky Fried Chicken (KFC), Taco Bell,and Pizza Hut. In 1988—less than 2 years after PepsiCo’s acquisition of KFC in October 1986—I joined KFC as manager of ﬁnance and strategicplanning. My responsibilities included managing KFC’s monthly ﬁnan-cial reporting documents, which were presented to the president of KFC-International each month. I also managed the strategic planning process,analyzed potential acquisitions, and presented proposals for new restaurantconstruction projects in Puerto Rico, Mexico, and Venezuela—where ourthree Latin American subsidiaries were based—to our president.Shortly after I joined KFC, a rumor spread throughout KFC’s head-quarters that a PepsiCo executive—who was visiting KFC for the day— was overheard in the cafeteria saying, “There will be no more homegrowntomatoes in this organization.” KFC employees were noticeably upset. A number of terminations of established KFC executives followed—thepersonnel director, general counsel, and controller, among others. Despitethe fact that the acquisition had occurred 2 years earlier, the organiza-tion appeared to be in a continuous state of turmoil. One employee toldme that more KFC employees were seeking psychological counseling forstress than at any time in the history of the organization. A PepsiCo exec-utive remarked to me that “We’re a performance organization. You mighthave been a star last year but if you don’t perform this year, you’re gone.There are a hundred executives with Ivy League MBAs back in PepsiCoheadquarters who would love to have your job.” As a PepsiCo employee, I’m certain that I didn’t feel the same stressthat longer-tenured KFC employees probably felt, although I was plenty stressed. We worked 12-hour days, 6 and a half days each week. There were times when I worked all night to meet deadlines. I became goodfriends with many KFC employees, many of whom were born and raised