Which of the following is not a reason for merger and acquisition failures?
A) The acquiring company pays too high a premium for the common stock of the target company.
B) Top executives act in their best interests rather than those of the shareholders.
C) The acquired company assets are poorly integrated into the acquiring company business lines.
D) The acquisition leads to value creation.

Question

Quizplus · Accepted Answer

Research shows that the vast majority of acquisitions result in value destruction rather than value creation. Many large multinational firms have also failed to effectively integrate their acquisitions, paid too high a premium for the common stock of the target company, or were unable to understand how the assets of the acquired firm would fit with their own lines of business. At times, top executives may not have acted in the best interests of shareholders. The motive for the acquisition may have been to enhance the power and prestige of the executive rather than to improve shareholder returns.

Which of the Following Is Not a Reason for Merger