Problems in Achieving Acquisition Success:
Integration Difficulties
•Integration challenges include:
Problems in Achieving Acquisition Success:
Inadequate Evaluation of Target
•Due Diligence
Problems in Achieving Acquisition Success:
Large or Extraordinary Debt
•High debt (e.g., junk bonds) can:
Problems in Achieving Acquisition Success:
Inability to Achieve Synergy
•Synergy
Problems in Achieving Acquisition Success:
Inability to Achieve Synergy (cont’d)
•Private synergy
–When the combination and integration of the
Problems in Achieving Acquisition Success:
Too Much Diversification
•Diversified firms must process more information
of greater diversity.
Problems in Achieving Acquisition Success:
Managers Overly Focused on Acquisitions
•Managers invest substantial time and energy
in acquisition strategies in:
Problems in Achieving Acquisition Success:
Managers of Target Firms
•Managers in target firms:
Problems in Achieving Acquisition Success:
Acquiring Firm Becomes Too Large
•Additional costs of controls may exceed the
Problems in Achieving Acquisition Success:
Acquiring Firm Becomes Too Large
Effective Acquisition Strategies
Complementary
Assets /Resources
Buying firms with assets that meet
current needs to build competitiveness.
Attributes of Effective Acquisitions
Attributes Results
Low–to-Moderate Debt Merged firm maintains
Flexibility Has experience at
managing change and is
flexible and adaptable
Restructuring
•A strategy through which a firm changes its set
of businesses or financial structure.
Types of Restructuring: Downsizing
• A reduction in the number of a firm’s employees
–Desire or necessity for more efficient operations
Types of Restructuring: Downscoping
•A divestiture, spin-off or other means of
Restructuring: Leveraged Buyout (LBO)
•A restructuring strategy whereby a party buys all
of a firm’s assets in order to take the firm private.
Restructuring and Outcomes
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