Lifetime camfrog pro code11/12/2022 ![]() ![]() Yet they are the ones most likely to confound investors and pay off spectacularly.Īlmost nobody understands how to identify targets that could transform a company, how much to pay for them, and how to integrate them. ![]() Almost nobody understands how to identify the best targets to achieve that goal, how much to pay for them, and how or whether to integrate them. The second, less familiar reason to acquire a company is to reinvent your business model and thereby fundamentally redirect your company. For this kind of deal, CEOs are often unrealistic about how much of a boost to expect, pay too much for the acquisition, and don’t understand how to integrate it. An acquisition that delivers those benefits almost never changes the company’s trajectory, in large part because investors anticipate and therefore discount the performance improvements. The first, most common one is to boost your company’s current performance-to help you hold on to a premium position, on the one hand, or to cut costs, on the other. To state that theory less formally, there are two reasons to acquire a company, which executives often confuse. ![]() As a result, companies too often pay the wrong price and integrate the acquisition in the wrong way. In a nutshell, it is this: So many acquisitions fall short of expectations because executives incorrectly match candidates to the strategic purpose of the deal, failing to distinguish between deals that might improve current operations and those that could dramatically transform the company’s growth prospects. What’s lacking, we believe, is a robust theory that identifies the causes of those successes and failures. A lot of researchers have tried to explain those abysmal statistics, usually by analyzing the attributes of deals that worked and those that didn’t. Yet study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%. Indeed, companies spend more than $2 trillion on acquisitions every year. When a CEO wants to boost corporate performance or jump-start long-term growth, the thought of acquiring another company can be extraordinarily seductive. In fact, however, those are the ones that can pay off spectacularly. Because the business models with the most transformative potential are often disruptive, they can be difficult to evaluate, and CEOs often believe that such acquisitions are overpriced. In those deals, the acquirer uses the target’s business model as a platform for growth. CEOs, who are often unrealistic about the performance boost from such acquisitions, must be sure not to pay too much for them.Ī less-familiar reason for making an acquisition is to fundamentally change a company’s growth trajectory. But to realize those benefits, the acquirer needs to achieve economies of scale by absorbing the target’s resources into its operations. The most common reasons for making an acquisition include holding on to a premium position or cutting costs. Executives can dramatically increase their odds of success, the authors argue, if they understand how to select targets, how much to pay for them, and whether and how to integrate them. Companies spend more than $2 trillion on acquisitions every year, yet the M&A failure rate is between 70% and 90%. ![]()
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