Mergers & Acquisitions

as Knowledge
Development Strategies
 Mergers and Acquisitions as Knowledge Development Strategies

Mergers and Acquisitions as Knowledge Development Strategies

Introduction

A common and significant strategy that organizations use to achieve development and
growth is mergers and acquisitions. Company integration has become common even across
borders as organizations seek to overcome competition and expand their activities (González-
Torres et al., 2020, 513). However, human capital and knowledge are priority resources that
support growth, especially in modern companies. Organizations are competing on innovation,
which is also leading to valuable growth due to alignment with changing consumer needs.
Intellectual capital has, as a result, become the main competing element and which organizations
are seeking. In mergers and acquisitions, organizations aim at improving their innovation and
management capabilities through interaction and increased autonomy over each other. Company
staff is carriers of most knowledge, although there is additional explicit valuable information.
Staff integration, as a result, facilitates the sharing of experiences and knowledge across merging
organizations. On the other hand, increased autonomy over each allows free access to such
recorded and explicit knowledge, which increases company capacity and capability. Therefore,
mergers and acquisitions are essential strategies through which organizations generate
knowledge, and knowledge is the primary driver to the approach. This paper will analyze reasons
organizations give for mergers and acquisitions, including sharing resources and collaboration
and reducing interdependency to find out the level of seeking knowledge development.

Development Strategies

Organizations merging and acquiring others aim at reducing interdependency to facilitate

growth in market power. Interdependency occurs when organizations use raw materials from
others or base their decisions on different firms' results. According to Jordão et al. (2017, 280),
mergers lead to the overall improvement in the management of elements of intellectual capacity,
including relation structural and human capital. One area that is of interest to this study is that
banks exposed the competitive strategies adopted by banks and integrated them to have greater
market power. Vretenar et al. (2017, 695) also argue the same way by stating that the small size
of some firms motivates mergers and acquisitions to reduce interdependency and gain market

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share and power. The idea in increasing market share is to allow organizations to access
competition tactics through proper management of intellectual capital. Competition tactics are a
knowledge asset in organizations in which competitors always seek motivating mergers and
acquisitions. Mergers and acquisitions, as a result, support organizations’ acquisition of
knowledge on how to better manage their Intellectual capital to develop quality brands that will
raise market power.

Mergers and acquisitions also impact good structures and planning of resources to
increase product value and market power. Irayanti (2019, 49) observes that mergers and
acquisitions motivate corporate restructuring, which later impacts on change in management
planning. Merged companies reduce interdependency of looking at how each other positions
itself in the market to support each other. Corporate restricting, as Irayanti (2019, 49) argues,
involves blending brands of the two companies because they can freely share their competitive
tactics, especially in management planning of intellectual capital. The companies stop depending
on each other’s moves branding and carry out management planning together through corporate
restructuring. Vieru and Rivard (2016) have a direct approach to the argument by stating that
mergers and acquisitions necessitate merging of information systems leading to direct sharing of
knowledge. In this case, the gain is the exchange of knowledge on how to manage intellectual
capital better. Corporate restructuring occurs because the companies have advanced their
intelligence in management planning of its intellectual capital leading to a stronger brand and
market power. Mergers and acquisitions thus strategically increase knowledge of managing
intellectual capital because organizations need a standard corporate structure.

With the analysis showing that the overall aim in reducing interdependency in merger
and acquisition leads to knowledge in intellectual capital management, this section will provide
an industrial example. On 13TH July 2020, Hewlett Packard Enterprise [HPE] announced its plan
and agreement of acquiring Silver Peak (Silver Peak, 2020, Par. 5). To enable HPE to develop
affordable and robust access to its cloud computing, the company acquired Silver Peak, which
has the knowledge and skills to modernize networks (Silver Peak, 2020, Par. 5). The two
companies initially depended and competed alongside each other. Their goal in reducing
interdependency for a more robust cloud and networking product, in this case, is a strategy of
developing knowledge on how to manage the intellectual capital for better innovations. The

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strategy is what Jordão et al. (2017, 280) and Irayanti (2019, 49) argue that companies blend
their information systems to access knowledge on managing resources better. HPE, in this case,
plans to benefit from knowledge on how to use its intellectual capital in ways that motivate
innovation in networks from Silver Peak. As a result, the industry supports the idea that mergers
and acquisitions are aimed at knowledge acquisition through reduced interdependency.

Another closely related concept to knowledge acquisition, which the literature covers, is
motivation to increasing organization autonomy through mergers and acquisitions. According to
Colman (2020, 148), acquiring firms seek to expand their capabilities by increasing their
independence towards the target organizations. The argument informs much about factors that
contribute to company growth, including innovation and proper management of various
resources, including intelligence capital. However, companies cannot get such knowledge from
others because they have limited control over their information, management, and knowledge
bank. Bodner and Capron (2018, 13) agree with the claim by stating that benefits to acquisition
and merger increase with an increase in the level of acquiring autonomy of the target or each
other. The benefit of developing and increasing autonomy over another organization includes the
ability to accesses stored production processes, management models, staff, intellectual labor, and
other forms of intellectual capital without restrictions. According to Irayanti (2019, 47),
companies do not have an interest in getting raw materials and material capital from others in
mergers and acquisitions. Most of the resources remain unutilized after the merger or acquisition
and indication that the motivation factor was sharing intellectual capital through increased access
to each other. Therefore, the idea of merger and acquisition is a strategy by organizations to gain
more control over others and access intellectual capital.

Graebner et al. (2017, 2), on the other hand, contributes to the concept of autonomy by
stating that acquisition and mergers are dynamic processes that end with a new organization. The
statement contradicts Bodner and Capron (2018, 13), who argue that firms seek to retain their
autonomy after the merger and acquisition strategies. However, Graebner et al. (2017, 2) show
that claiming mutual respect to maintain autonomy is only a strategy for obtaining acquisitions.
Post-merger integration leads to emergent phenomena like the need for more independence from
acquiring the target organization. Acquiring companies focus on controlling the target ones to get
more access to their capital, especially intelligence, including management and innovative skills

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with human resources. Graebner et al. (2017, 2) define acquisition and mergers as developing
new organizations to show that there is lost autonomy of either each or both as intellectual
capital becomes one. The acquiring company is beneficial because it has the capacity and
negotiation power to increase its autonomy towards the target, which sort preservation slowly.
Lamont et al. (2019, 105) agrees with Graebner et al. (2017, 3) that mergers and acquisitions'
goal extends beyond sharing management and resources to gaining access to valuable
intelligence. Organizations, as a result, engage in mergers and acquisitions as a secrete strategy
to develop knowledge through absorbed autonomy.

Google's case in the North's acquisition is a case in point, showing empirical convergence
of acquisition, autonomy absorption, and intellectual capital. The company acquired North, a
smart glasses maker on June 30TH 2020 (Osterloh, 2020, Par. 1). According to North, Google will
help the company achieve its vision, which it shares with the giant technology organization
(North Inc. (2020, Par. 2). However, Google has a different perspective of improving its
hardware in serving people (Osterloh, 2020, Par. 1). Although North's focus is to retain
autonomy and only share management and finances to achieve its vision, google appears to be
seeking knowledge on how to make the glasses. The acquisition dynamic aligns with Bodner
and Capron (2018, 13) and Graebner et al. (2017, 2), who argues that target companies seek to
retain while the acquirer seeks to absorb autonomy. Google has tried to make its smart glasses
without success and, therefore, seek more knowledge through access to copyrights and patents
on the concept used. The company has enough resources and only lacks intelligence hence, its
goal would only be innovative skills in making the glasses. The case supports the statement that
mergers and acquisitions are strategies for developing intellectual capital and the main goal in
such strategies.

Collaboration is another motive that organizations seek during mergers and acquisitions
that provides insight into their goal of developing knowledge. According to Yen et al. (2017, 5),
the organization collaborates through mergers and acquisitions to build a relationship that
facilitates sharing resources and developing market power. The relationship in which staffs
between organizations in merger and acquisition develop facilitates the transfer of tacit and
explicit knowledge (Yen et al., 2017, 5). Among the resources which organization can share
when they have a close relationship is intellectual. Formal collaboration through mergers and

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acquisitions guarantees trust that allows organizations to freely share secrete information about
production processes, management, and innovation. Such organizations would not need such
detailed trust to share other resources like raw materials. Bauer et al. (2016, 85) have an
opposing argument stating that human integration in mergers and acquisitions is destructive in
achieving innovation. The sharing of capabilities and resources facilities the spread of innovation
between parties in the strategy while the staff reserves their knowledge with respective
companies (Bauer et al., 2016, 85). However, the argument fails to consider the knowledge that
employees acquire by looking at what other employees are doing and during task sharing.
Employees discuss across companies how to handle tasks leading to the spread of knowledge.
Therefore, the collaboration that organizations seek through mergers and acquisitions is a
strategy to acquire knowledge, which is their overall goal.

The concept through which innovation develops after mergers and acquisitions further
provides insight into how companies aim at knowledge through collaboration. In a research
study, Jo et al. (2016, 17) finds and concludes that merging organizations with similar production
lines such as technology learn from each other leading to increased innovation. In most cases,
large firms acquire smaller ones with the motive of getting their technology. The aim to combine
with the company technology for advanced level of innovation and hence, market power.
However, the innovative aspect of technology is tacit knowledge, which employees hold. Zhao et
al. (2020, 4836) agree with the argument by reporting a positive relationship between the transfer
of knowledge and the level of innovation in mergers and acquisitions. Organizations consider
mergers and acquisitions to impact innovation as they collaborate in thinking among staff.
However, the fact that innovation increases with an increase in knowledge development reveal a
pre-planned strategy. Sharing of innovation is the sharing of knowledge because there is no
tangible information to provide. Organizations, as a result, seek knowledge through collaboration
and relationships strategy in mergers and acquisitions to facilitate innovation.

This section will examine the case where Cisco acquired ThousandEyes to assess facts
about knowledge development priority through collaboration. Cisco acquired ThousandEyes on
28Th May 2020 (Nightingale, 2020, Par 1). Both are technology companies providing network
services, although ThousandEyes has more intelligence, especially in identifying failures in
networks and other performances. However, Cisco seeks to attach the performance tracking

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technology to its products. The acquisition follows Yen et al. (2017, 5) strategy suggesting that
organizations with similar production lines seek to acquire to enhance innovation. Cisco would
have contacted ThousandEyes to embed the same technology without acquisition or merger
(Nightingale, 2020, Par 2). The strategy indicates that Cisco has other dynamic motives for
acquiring knowledge to increase innovation to enhance its products. In this case, the acquiring
company wants the collaboration so that as ThousandEyes embeds the technology, its team
learns to become innovative. The model aligns with Zhao et al. (2020, 4836), who demonstrate
that innovation increases with increased knowledge from the target company. Cisco can only
become innovative if its staff learns and not by enabling ThousandEyes’ technology. The
industrial case, as a result, reveals that the motive to collaborate in mergers and acquisitions is a
strategy to improve knowledge for innovation purposes.

A closer motive of mergers and acquisitions to collaboration is social integration, in

which this section will assess the chances of being a strategy to develop knowledge.
Organizations engaging in mergers and acquisitions sometimes argue that the strategy will
enhance social integration between the two companies' management and staff. Bodner and
Capron (2018, 18) argue that the acquirer's goal is to generate new resources necessitating the
need for integration between the two companies. Organizations in the strategy can either group
departments or develop links between groups to allow flow and sharing resources (Bodner and
Capron, 2018, 18). The research and author demonstrate that the main aim of supporting
corporate growth in mergers and acquisitions is through interaction between the two
organizations' departments. Resources that departments can with grouping are intellectual
capital. The management has the authority and ability to share other tangible resources with
agreements and without acquisitions. Sarala et al. (2019, 307) are in support of the motive
behind social integration by stating that human resource practices, employees, culture, and social
processes define the success of acquisitions. The statement again reveals that the primary
strategy in acquisition and mergers is to link people instead of other tangible resources. The goal
of mergers and acquisitions, therefore, emerges to be the acquisition of knowledge through social
integration.

On the other hand, social integration and the employee response have received wide
research in mergers and integration and could insight into whether an organization seeks

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knowledge through the strategy. In one of the studies, Zagelmeyer et al. (2018, 94) conclude that
mergers and acquisitions' success depends on the behaviors and attitudes of the employees. The
priority assumption on the role of employees in the strategy is usually to implement the merger.
A question arises: Do the employees have anything to offer during integration to facilitate the
acquisition or merger goals? Bodner, J., and Capron (2018, 16) answer the question by stating
that employee retention during integration is essential to facilitate sharing capabilities and
technologies. The literature shows that employees are carries of the variable resources which
companies seek from each other. Too much focus on employee integration, including the new
organization's culture, further reveals priority in the role of employees during the integration of
companies. Employees have nothing to offer apart from knowledge, mostly tacit. The tacit
knowledge is what such organizations seek because they cannot get it through other means,
whether formal or informal. Employees have to interact with each other so that the interactions
produce experience and learning to the acquirer’s staff. The literature, as a result, supports that
the goal of mergers and acquisitions is to tap knowledge that will enhance corporate capabilities
through social integration.

Another explicit objective that goes hand in hand with social integration is the training of
employees and managers, which this paper will use to assess knowledge development.
According to Jordão et al. (2017, 282), organizations engage in mergers and acquisitions to
bridge the gap between themselves and hence support each other in capacity and capability
building. Jordão et al. (2017, 282) note that some of the differences between organizations
include management styles, culture, and production-related processes, which organizations
merge through combined staff training. The author provides direct reasons why organizations
merge, which are to share resources. However, there is an insight into resources that such
companies share, although they do so unconsciously, including the improved style of
management and organization of human resources, which comprises intellectual capital.
Following (Irayanti, 2019, 47) that sharing of other tangible resources like law materials is never
a need, it follows that companies seek to bridge the gap in intellectual capital. Jordão et al.
(2017, 282) note that after merger integration, the main element is training staff about the new
culture and processes. The training is a primary target of the acquirer as staff from the target
exposes their knowledge on management style, culture, and other intellectual capacities that

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make them innovative and successful. Mergers and acquisitions are, therefore, a benchmark
strategy to learn and accumulate knowledge from participating parties.

Conclusion

The current literature agrees with the argument that organizations seek mergers and
acquisitions to add more knowledge that will motivate growth and development. There is also
agreement that knowledge development is the primary driver in the growth strategy. Among the
supporting point in the literature is that companies seek to reduce interdependency through
mergers and acquisitions. A critique on the point reveals that the need for reduced
interdependency is to have free access to knowledge, which is hard to transfer through other
forms of the agreement due to the need for trust. The literature also argues that organizations,
especially the acquirer, seek more autonomy in others through mergers and acquisitions.
Independence, as the paper evaluates, allows access of secretes, which are in the form of
information and knowledge instead of sharing other resources, such as raw materials. The need
for collaboration as the literature guides has an element in accessing each other’s valuable
knowledge as employees interact. In the reasons provided, sharing and access to raw materials
and other resources are insignificant, meaning that companies seek knowledge, which also drives
them to mergers and acquisitions.

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