Directors Who Shy Away From Acquisitions May Cost Shareholders Dearly In Lost Opportunities
After seeing the result of several recent studies, corporate directors can hardly be blamed if they lack enthusiasm for proposing or approving acquisitions. According to one study, 58 percent of mergers destroyed shareholder value, profitability of companies involved in mergers declined an average of 10 percent, and fully 75 percent of mergers fell short of meeting the strategic goals that inspired them. The flip side of these numbers is, of course, that some acquisitions do work out well and increase shareholder value. Directors who shy away from acquisitions because of the negative assessments of M&A activities may be doing their companies a great disservice. It points out four common motivations for making strategic acquisitions and citing examples in which all four were employed to increase shareholder value. These have been discussed in detail in the article.