Acquiring another business can be highly rewarding when certain basic principles are followed…
But what happens when those basic principles are completely ignored?
Here are 3 of the biggest reasons why acquisitions can go wrong:
🔹 POOR FIT. Where the buyer makes a total mess of post-deal integration or ends up dismantling the business altogether. Perhaps because the culture and the chemistry didn’t match in the first place. What Microsoft did to Nokia is a prime example.
🔹 TOO RISKY. Hard to believe that RBS coughed up €71bn for Amro without completing sufficient due diligence, later needing a government bail-out. A successful outcome for buyer and seller requires a basic understanding of risk, a balance of that risk between both parties – and an awareness of the economic landscape.
🔹 OVERPAID. Some buyers will pay a premium to acquire your business if it satisfies a specific strategic objective. But there is such a thing as overpaying. The $44 billion that Elon Musk paid for Twitter was double its actual value, according to Musk himself. Good news for the exiting shareholders, but for Musk and his investors, there’s a big difference between over-paying and paying a premium.
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