Does Accquisition Mean Business Growth Success?

I’ve blogged about mergers and acquisitions before (Rooted In The Past – October 2012 Blog Archive), and even wrote an Orange Paper on it (Firm Acquisitions) which you can download from my website.  However, a lot of CEOs solely focus on acquisitions to help their firms grow rather than also working on organic growth from within.  According to an article in Harvard Business Review, research suggests that in only 36% of acquisitions do companies realize enough cost savings to cover the premium they’ve paid.  Additionally, in the other 64%, a company’s annual total shareholder returns are, on average, negative 2%.  So even with acquisitions, organic growth of the acquired must be part of the equation.  There’s a big opportunity waiting for CEOs to help bring focus and resources to existing operating units, rather than putting so much energy into the transaction of a new acquisition.  My point is, rather than exclusively looking for growth through merger or acquisition; a smart CEO will put their resources into growing organically as well. 

 

Ann Banning - Wright