Publications
Why do acquisitions so often destroy Shareholder Value?
For decades, studies have shown that up to 80 per cent of acquisitions destroy value for the acquirer's shareholders. The value destroyed is not small. One study showed that companies investing more than 10 per cent of their capital in an acquisition had, after five years, stock prices that were only 60 per cent of those of a comparable peer group. It also showed that, mathematically, this result could have been predicted when the acquisitions were made, given the terms of those acquisitions.
In this paper, the author discusses why so many acquisitions go wrong, and why so many companies continue to pursue a strategy that, for the large majority of them, can be expected to result in the impoverishment of their shareholders.
|
