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Motivators Behind the Acquisition Phenomenon
Atkins, Drew
Atkins, Drew
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2017
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2017-05-19
Abstract
An acquisition is a corporate transaction in which a company purchases a target firm's ownership and assumes control of the target company. Acquirers typically rely on realizing synergies between multiple firms. Thus, corporations rationalize acquisitions as a way of externally sourcing resources to create growth. At face value, acquisitions are good business decisions for managers to undergo. They are designed to enhance shareholder wealth. However, acquisitions are expensive. Shareholders often pay billions of dollars in order to finance said deals, yet rarely realize the company's expected returns following the transaction. Therefore, the frequency of acquisitions undergone, often based on the potential profitability, disconnects from the recognized success rate of acquisitions, measured by changes in market value. The majority financially irresponsible acquisitions alludes to an irrational phenomenon. However, a company's internal persons; external, yet related persons; and the broader macroeconomic environment, all rationally motivate for corporate acquisitions.
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Finance