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# In an effort to explain why business acquisitions often fail, schola

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In an effort to explain why business acquisitions often fail, schola [#permalink]

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Updated on: 27 Nov 2017, 08:22
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OG 2017 New RCLine
In an effort to explain why business acquisitions
often fail, scholars have begun to focus on the role
of top executives of acquired companies. Acquired
companies that retain their top executives tend to
(5)
have more successful outcomes than those that do
not. Furthermore, existing research suggests that
retaining the highest-level top executives, such as the
CEO (chief executive officer) and COO (chief operating
officer), is related more positively to post acquisition
(10)
success than retaining lower-ranked top executives.
However, this explanation, while insightful, suffers from
two limitations. First, the focus on positional rank does
not recognize the variation in length of service that
may exist in top executive posts across companies,
(15)
nor does it address which particular top executives
(with respect to length of service) should be retained
to achieve a successful acquisition outcome. Second,
the relationship between retained top executives and
acquisition outcomes offered by existing research
(20)
is subject to opposing theoretical explanations
related to length of service. The resource-based view
(RBV) suggests that keeping acquired company top
executives with longer organizational tenure would lead
to more successful outcomes, as those executives
(25)
have idiosyncratic and nontransferable knowledge
of the acquired company that would be valuable for
the effective implementation of the acquisition. The
opposing position, offered by the upper echelons
perspective (UEP), suggests that retaining top
(30)
executives having short organizational tenure would
lead to more successful outcomes, as they would have
the adaptability to manage most effectively during the
uncertainty of the acquisition process

Responding to these limitations, Bergh conducted
(35)
a study of executive retention and acquisition
outcome that focused on the organizational tenure of
retained company top executives in 104 acquisitions,
followed over 5 years. Bergh considered the
acquisition successful if the acquired company was
(40)
retained and unsuccessful if it was divested. Bergh’s
findings support the RBV position. Apparently, the
benefits of long organizational tenure lead to more
successful outcomes than the benefits of short
organizational tenure. While longer tenured top
(45)
executives may have trouble adapting to change, it
appears that their perspectives and knowledge bases
offer unique value after the acquisition. Although
from the UEP position it seems sensible to retain
less tenured executives and allow more tenured
(50)
ones to leave, such a strategy appears to lower the
probability of acquisition success.
(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and postacquisition success?
A. Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success.
C. These executives are less important to postacquisition success than are more highly ranked top executives.
D. If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives.
E. Postacquisition success is unlikely if these executives are retained.

[Reveal] Spoiler:
C

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
A. The managerial skills of top executives become strongest after the first five years of their tenure.
B. Company-specific knowledge is an important factor in the success of an acquisition process.
C. The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated.
D. Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change.
E. Short-tenured executives are likely to impede the implementation of a successful acquisition strategy.

[Reveal] Spoiler:
B

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

[Reveal] Spoiler:
D

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

[Reveal] Spoiler:
A

[Reveal] Spoiler: Question #1 OA
[Reveal] Spoiler: Question #2 OA
[Reveal] Spoiler: Question #3 OA
[Reveal] Spoiler: Question #4 OA

_________________

Md. Abdur Rakib

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Sentence Correction-Collection of Ron Purewal's "elliptical construction/analogies" for SC Challenges

Originally posted by AbdurRakib on 26 Jul 2016, 14:25.
Last edited by Skywalker18 on 27 Nov 2017, 08:22, edited 1 time in total.
formatted
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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16 Aug 2016, 07:37
Got all correct in 11 minutes. I took quite some time to solve the last question but fortunately, I got it right!

Does anyone has any sort of tips on how to attack such sort of passages with 100% accuracy in minimum time. The case with me is, although I get 100% correct, I take more than allotted time to solve the question. Any views mikemcgarry MBAPrepCoach daagh sayantanc2k
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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14 Dec 2016, 04:44
6
KUDOS
(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and post acquisition success?
A. Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success. - This is a RBV proponent view.
C. These executives are less important to postacquisition success than are more highly ranked top executives. - Stated in passage
D. If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives. - Not stated in passage
E. Postacquisition success is unlikely if these executives are retained. - Out of scope/ Passage does not mention about failure of acquisition if such employees are retained, instead it talks about success if top executives are retained.

Question Type - Supporting Idea
Line No. 7 to 10 states - "Furthermore, existing research suggests that retaining the highest-level top executives, such as the CEO (chief executive officer) and COO (chief operating officer), is related more positively to post acquisition success than retaining lower-ranked top executives."
[Reveal] Spoiler:
C

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
A. The managerial skills of top executives become strongest after the first five years of their tenure. - Out of Scope
B. Company-specific knowledge is an important factor in the success of an acquisition process.
C. The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated. - RBV does not underestimate
D. Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change. - UEP View
E. Short-tenured executives are likely to impede the implementation of a successful acquisition strategy. - RBV talks about positive inputs from retained top executives and not ill-effect of short tenured eecutives

Question Type - Evaluate
My query with the ans is, it mentions success of an acquisition process - (Acquisition process/ Implementation/ Post acquisition) Such differences would matter if solving a 700+ lvl question
Line 21 says - The resource-based view (RBV) suggests that keeping acquired company top executives with longer organizational tenure would lead to more successful outcomes, as those executives have idiosyncratic and nontransferable knowledge of the acquired company that would be valuable for the effective implementation of the acquisition.
Line No 45 - While longer tenured top executives may have trouble adapting to change, it appears that their perspectives and knowledge bases offer unique value after the acquisition.
[Reveal] Spoiler:
B

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

Question Type - Evaluate
The justification here is Bergh discussed only about the (tenure = knowledge) of the executive in his study,
Hence an option talking about adaptability or knowledge is out - A / B / C
Option (E) talks about highest ranked and lower ranked executives and not their tenures. - Out
After elimination - Answer is D - and it also follows the flow of the question - disagreement is on optimal acquisition strategy.

Now my query in question (2) solidifies - Question 2 states Implementation process whereas this question states post acquisition.
It is a nimble difference but if noticed can alter the answer for a specific question.
[Reveal] Spoiler:
D

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Question type - Inference
Justification - Line no. 12 - "two limitations. First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies"
[Reveal] Spoiler:
A

egmat mikemcgarry ankurgupta03 sayantanc2k
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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29 Dec 2016, 05:57
(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Question type - Inference
Justification - Line no. 12 - "two limitations. First, the focus on positional rank does not recognize the variation in length of service that may exist in top executive posts across companies"

You're quoting the wrong section here. Limitation 1 as stated in the passage talks about the variation in length of service that may exist in top executive posts across companies....it talks about inter-companies variance in the respective tenures.

It was the theoretical explanations regarding the second Limitation (pertaining to length of service ) that had opposing view...Berjh collected data for 5 years and hence was able to support one theory and addressed how the organizational tenure of top executives affects post-acquisition success i.e. length of tenure is directly proportional to the post acquisition success(same as option A). Hence he addressed Limitation 2.

Regards
SR
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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26 Aug 2017, 08:11
Solved all correctly but I took almost 10.5 minutes.

Guys, any idea to tackle such kind of passage in a minimum of time duration?

Regards,
Pratik
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Joined: 12 Dec 2016
Posts: 89
Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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12 Oct 2017, 21:23
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keats wrote:
Got all correct in 11 minutes. I took quite some time to solve the last question but fortunately, I got it right!

Does anyone has any sort of tips on how to attack such sort of passages with 100% accuracy in minimum time. The case with me is, although I get 100% correct, I take more than allotted time to solve the question. Any views mikemcgarry MBAPrepCoach daagh sayantanc2k

Strategy: Time per passage = No. of questions * 2 mins. This includes reading time. 4 questions, 8 mins max.

2. For long passages, take notes (you shouldn't have to refer to these notes - they help with comprehension) and make sure you understand the first paragraph as this contains most of the info. Then identify the main point of the first paragraph.
3. Pick up pace as you read the rest of the passage, focusing on the first two sentences of each paragraph as they are bound to be topical sentences.
4. Don't get bogged down in details and specifics.
5. Look out for Big Results, unexpected outcomes and surprising twists
6. Identify the Point of the passage and then proceed to the questions.
7. You should be able to answer general questions without going back to passage
8. For specific questions, refer to relevant text in the passage and read the sentences surrounding that text and make sure you understand it, then start Process of Elimination.
9. JUSTIFY EVERY WORD in the correct answer
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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01 Dec 2017, 12:20
Time Taken - 12 mins

Got 2/4 correct.
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In an effort to explain why business acquisitions often fail, schola [#permalink]

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24 Dec 2017, 12:16
I have a question regarding 430.
(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Aren't RBV and UEP studies conducted before Bergh's study? If so, there are some studies which took CEO's tenure into consideration than how is A a correct answer?
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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15 Feb 2018, 20:11
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This passage should not take more than 6 minutes to solve .

you should take 15min to 2 min at max to rad the paragraph

STEP 1 : Read the first few line of Passage.Get the TOPIC/SCOPE of the passage
Topic/Scope :
Write down on the scratch pad

STEP 2: Specialty of the passage as to why Author is writing this passage.
Mostly this will be in the second line of the passage
Specialty :
Write down on the scratch pad.

STEP 3: Next lines should simply describe either topic or specialty or supporting ideas or evidence.
Don't Even read these lines , you can always come back to these lines as long as you have your notes from STEP 1/STEP 2.

STEP 4: Very important ,
4a) SKIM for change in direction (Ex: However , yet , but, Despite, in spite, Although , even though ,Nonetheless, )
And note this change in Idea.
4b) SKIM for Tonal Words and note this tonal idea.(Ex: Unfortunately, one enemy , someone came in right timing,
truly , admittedly, unwillingly , and note this down.

Now you have to look at the scratch pad between STEP 1/STEP 2 and STEP 4 and carefully look what exactly is the CHANGE OF IDEA/Tonal Variation.

Repeat this for every Paragraph.Overall you should read only 4 to 5 sentences in the entire Passage in 1 to 2 minutes.

Notes should look like for each paragraph,
TOPIC/SCOPE:
SPECIALTY :
CHANGE in IDEA:
Not down any Nouns, Dates, Names etc....You can always come back to this section

Note:for some paragraphs you might not see any CHANGE in IDEA or any tonal variation so just get STEP 1/STEP 2 for that Paragraph

With this you can easily crack RC.
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In an effort to explain why business acquisitions often fail, schola [#permalink]

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17 Mar 2018, 22:29
GMATNinja GMATNinjaTwo
Book Q: 429
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

I am confused with correct strategy to answer this question. The passage suggests that Bergh supported RBV and this question asks what people who supported UEP (or opposed RBV) would disagree with? How can both mean the same thing?
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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18 Mar 2018, 02:25
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
No because the debate is on the post acquisition success .
So the correlation has to be between Organizational tenure and post acquisition success.

B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
Again the correlation has to be between Organizational tenure and post acquisition success.

C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
No. Adaptability is a reason given by UEP as to why short organizational tenure executives will have impact on post acquisition success.

D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving post acquisition success

E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives
The contrast between Bergh and UEP is whether tenure plays an important role on post acquisition success not on the position of executivels
Question 3
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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20 Mar 2018, 19:50
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Expert's post
GMATNinja GMATNinjaTwo
Book Q: 429
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

I am confused with correct strategy to answer this question. The passage suggests that Bergh supported RBV and this question asks what people who supported UEP (or opposed RBV) would disagree with? How can both mean the same thing?

We are not looking for a statement that BOTH Bergh and UEP would disagree with. Remember, each answer choice starts with "whether" and thus represents multiple perspectives. Each answer choice essentially presents a question.

For example, consider choice (D): "Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving post-acquisition success." In other words, is retaining less-tenured top executives of an acquired company is an optimal strategy for achieving post-acquisition success? Bergh/RBV-supporters would say, "No." UEP-supporters would say yes. Thus, Bergh and UEP supporters would disagree over choice (D), making (D) our answer.

Make sense?
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Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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02 Apr 2018, 15:58
Hi,

I'm still not sure about the explanation for 430:

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

Doesn't D refer to the following line : "or does it address which particular top executives (with respect to length of service) should be retained
to achieve a successful acquisition outcome"?
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Posts: 15
Re: In an effort to explain why business acquisitions often fail, schola [#permalink]

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09 Apr 2018, 20:00
AbdurRakib wrote:
OG 2017 New RCLine
In an effort to explain why business acquisitions
often fail, scholars have begun to focus on the role
of top executives of acquired companies. Acquired
companies that retain their top executives tend to
(5)
have more successful outcomes than those that do
not. Furthermore, existing research suggests that
retaining the highest-level top executives, such as the
CEO (chief executive officer) and COO (chief operating
officer), is related more positively to post acquisition
(10)
success than retaining lower-ranked top executives.
However, this explanation, while insightful, suffers from
two limitations. First, the focus on positional rank does
not recognize the variation in length of service that
may exist in top executive posts across companies,
(15)
nor does it address which particular top executives
(with respect to length of service) should be retained
to achieve a successful acquisition outcome. Second,
the relationship between retained top executives and
acquisition outcomes offered by existing research
(20)
is subject to opposing theoretical explanations
related to length of service. The resource-based view
(RBV) suggests that keeping acquired company top
executives with longer organizational tenure would lead
to more successful outcomes, as those executives
(25)
have idiosyncratic and nontransferable knowledge
of the acquired company that would be valuable for
the effective implementation of the acquisition. The
opposing position, offered by the upper echelons
perspective (UEP), suggests that retaining top
(30)
executives having short organizational tenure would
lead to more successful outcomes, as they would have
the adaptability to manage most effectively during the
uncertainty of the acquisition process

Responding to these limitations, Bergh conducted
(35)
a study of executive retention and acquisition
outcome that focused on the organizational tenure of
retained company top executives in 104 acquisitions,
followed over 5 years. Bergh considered the
acquisition successful if the acquired company was
(40)
retained and unsuccessful if it was divested. Bergh’s
findings support the RBV position. Apparently, the
benefits of long organizational tenure lead to more
successful outcomes than the benefits of short
organizational tenure. While longer tenured top
(45)
executives may have trouble adapting to change, it
appears that their perspectives and knowledge bases
offer unique value after the acquisition. Although
from the UEP position it seems sensible to retain
less tenured executives and allow more tenured
(50)
ones to leave, such a strategy appears to lower the
probability of acquisition success.
(Book Question: 427)
According to the passage, the research mentioned in line 6 suggests which of the following about lower-ranked top executives and postacquisition success?
A. Given that these executives are unlikely to contribute to postacquisition success, little effort should be spent trying to retain them.
B. The shorter their length of service, the less likely it is that these executives will play a significant role in postacquisition success.
C. These executives are less important to postacquisition success than are more highly ranked top executives.
D. If they have long tenures, these executives may prove to be as important to postacquisition success as are more highly ranked top executives.
E. Postacquisition success is unlikely if these executives are retained.

[Reveal] Spoiler:
C

(Book Question: 428)
The resource-based view, as described in the passage, is based on which of the following ideas?
A. The managerial skills of top executives become strongest after the first five years of their tenure.
B. Company-specific knowledge is an important factor in the success of an acquisition process.
C. The amount of nontransferable knowledge possessed by long-tenured top executives tends to be underestimated.
D. Effective implementation of an acquisition depends primarily on the ability of executives to adapt to change.
E. Short-tenured executives are likely to impede the implementation of a successful acquisition strategy.

[Reveal] Spoiler:
B

(Book Question: 429)
The passage suggests that Bergh and a proponent of the upper echelons perspective would be most likely to disagree over which of the following?
A. Whether there is a positive correlation between short organizational tenure and managerial adaptability
B. Whether there is a positive correlation between long organizational tenure and the acquisition of idiosyncratic and nontransferable knowledge
C. Whether adaptability is a useful trait for an executive who is managing an acquisition process
D. Whether retaining less-tenured top executives of an acquired company is an optimal strategy for achieving postacquisition success
E. Whether retaining highest-level top executives of acquired companies is more important than retaining lower-ranked top executives

[Reveal] Spoiler:
D

(Book Question: 430)
According to the passage, prior to Bergh’s study, research on the role of top executives of acquired companies in business acquisition success was limited in which of the following ways?
A. It did not address how the organizational tenure of top executives affects postacquisition success.
B. It did not address why some companies have longer-tenured CEOs than others.
C. It did not consider strategies for retaining long-tenured top executives of acquired companies.
D. It failed to differentiate between the contribution of highest-level top executives to postacquisition success and that of lower-ranked top executives.
E. It underestimated the potential contribution that lower-level top executives can make to postacquisition success.

[Reveal] Spoiler:
A

The Lines - 13 to 17

"First, the focus on positional rank does
not recognize the variation in length of service that
may exist in top executive posts across companies,
(15)
nor does it address which particular top executives
(with respect to length of service) should be retained
to achieve a successful acquisition outcome. "

The length of service refers to which of these ??

a) The tenure spent in the company

or

b) The tenure left in the company

A top company executive may be quite young but quite inexperienced in the company , so his tenure completed in the company may be short but his tenure to ;ead the company will be quite long .

Which tenure/length of service is mentioned in the lines 13 to 17 ??
Re: In an effort to explain why business acquisitions often fail, schola   [#permalink] 09 Apr 2018, 20:00
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