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ACCA Strategic Professional · Advanced Financial Management · Acquisitions and mergers versus other growth strategies

Which of the following is a typical reason why many acquisitions fail to create value for the acquirer's shareholders?

Acquisitions often fail to create value because synergies are overestimated or integration goes badly, and the premium paid hands most of the benefit to the target's shareholders. The other statements are absolute claims that are not true in general.

  1. AThe target's shareholders always reject any bid made
  2. BSynergies are overestimated or a high premium transfers most of the gains to the target's shareholdersCorrect
  3. CAcquisitions never change the acquirer's risk profile
  4. DOrganic growth always produces higher returns than acquisition

Explanation

Value is lost when expected synergies fail to materialise or the premium paid consumes them, and integration problems add to this. The other statements are false generalisations.

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