Abstract

There are three distinct phases in the successful execution of a merger. The first phase encompasses all the preliminaries up to and including the acquiring firm's public announcement of an intent or desire to merge with the target firm; this is the merger decision-making phase. The second phase is in effect until the merger is complete from an external, legal point of view; this is the merger bargaining phase. The third phase involves the integration of the two corporate structures and is called the merger integration phase. This article analyzes only the merger decision-making phase. A merger decision is a strategic decision, a decision specifically designed to enhance the survival or well-being of the corporation-planned and executed by a small, select group of corporate officers. These corporate officers are duty bound to define the best interests of their corporation. Typically, these corporate officers identify with their corporation to the extent that a difficulty in clearly differentiating between the corporation's best interests and their own self-interests is not uncommon. Two possibilities should be carefully distinguished here. Corporate officers may identify their own self-interests as originating in the best interests of their corporation; such an identification is not surprising and is widely institutionalized in executive compensation arrangements.