One‐Way Versus Two‐Way Postacquisition Integration Efforts: Theory and Evidence

We develop a theory of postacquisition integration that distinguishes between one‐way (acquirer‐only) and two‐way (mutual) effort strategies. We argue that the method of payment—cash versus shares—may serve as an ex ante commitment mechanism to a particular integration strategy, where cash deals align with unilateral effort, and share deals induce mutual engagement. Using transaction‐level mergers and acquisitions data covering 1986–2009, we show that stock‐financed acquisitions yield higher postmerger productivity, particularly in knowledge‐intensive industries, but also exhibit greater performance variance. These higher‐mean and higher‐variance tendencies for share‐financed vis‐à‐vis cash‐financed acquisitions involve countervailing effects when factoring stock‐market valuations; further, share‐financed acquisitions are discounted when financial markets are characterized by high degrees of risk aversion. Overall, our findings highlight how financial structure shapes integration dynamics and synergy realization.