Do prior alliances with the target affect acquisition performance? the dangers of a honeymoon before marriage

This paper investigates whether the effect of pre-acquisition alliance between the acquirer and the target on subsequent acquisition performance is dependent on the duration of the pre-acquisition alliance. Our examination of the effects of pre-acquisition alliance duration on acquisition outcomes incorporates the concept of honeymoon period (Fichman & Levinthal, 1991). We hypothesize that an acquisition decision is vulnerable to bias and illusion if the decision is made during the honeymoon period of the pre-acquisition alliance. On the contrary, acquisition decisions made after the honeymoon period of pre-acquisition alliance is over reflect more exact information and a more sober understanding of the target. This hypothesis is examined in a panel database made up of acquisitions performed by French firms in the US between January 1988 and December 2006. We show that there is an inverted U-shaped relationship between the duration of pre-acquisition alliance and the probability of acquisition failure. Our results also highlight that the non-monotonic relationship between the duration of pre-acquisition alliance with the target and the probability of acquisition failure is moderated by the degree of partner commitment to the alliance.