High failure rate of acquisitions
What is the reason for the failure?
There should be some evidence of synergies in the acquiring firm to produce an acquisition that would enhance shareholder value.
In practice, the shareholders of predator companies seldom enjoy synergistic gains, whereas the shareholders of victim companies benefit from a takeover.
The acquiring company often pays a significant premium over and above the market value of the target company prior to acquisition.
suggests that takeovers are motivated by the self-interest of the acquirer's management.
can be detrimental to successful integration.
Lack of communication of goals and future prospects of employees can lead to employees being unclear of what is expected of them.
can be also a reason for the high failure rate.
It is where companies are not acquired because of the synergies that they may create, but in order to present a better financial picture in the short term.