M&A research has consistently shown that value is destroyed for a majority of acquirers. Despite initial small positive gains at deal announcement, within a year of closing the transaction a majority of acquirers experience overall negative returns. Nevertheless, the constant pressures to grow leave company leaders few other viable options than pursuing M&A. This ever present cycle of value destruction is of interest to both scholars and practitioners. Of interest is what can be done differently by the acquirer to prevent the inevitable value erosion from occurring. To investigate this question, the author develops an adapted version of the Acquisition Based Dynamic Capabilities (ABDC) framework, a theoretical extension of Dynamic Capability theory. The framework is helpful in identifying what corporate M&A capabilities contribute to value creation through a transaction lifecycle. The adapted ABDC framework provides a means to quantify the differing impacts to value creation among the M&A capabilities of “Selecting and Identifying”, “Transacting and Executing” and “Reconfiguring and Integrating”.

The empirical study utilizes 337 regulated energy, public company transactions, closed between 1995 and 2014. This industry is appropriate to study the application of this theory as it benefits from long dated deal timelines and specific milestone events (deal announcement, regulatory approval, financial closing, etc.) providing clear points of delineation for measurement purposes. Performance is measured using weak and semi-strong specifications of shareholder returns with a “golden set” of measures identified. Additionally, the impacts on the ABDC measures from shock waves, bandwagon effects, management traits, financial factors, deal complexity and other relevant factors are all evaluated to test for their impacts on the analyzed transactions. The results suggest that despite many acquirers receiving some positive value accretion from announcement and short-term post-closing returns, larger one year post-close reductions in value eclipse previous gains for most acquirers. The results validate the importance of the Reconfiguring and Integrating (R&I) phase of an acquisition. Comparisons to Top and Poor Performers provide a clear set of recommendations for future energy industry acquirers.