Michael_A._Hitt,_R._Duane_Ireland,_Robert_E._Hosk

216 Part 2: Strategic Actions: Strategy Formulation

7-3 Problems in Achieving Acquisition Success

Effective and appropriate use of the acquisition strategies discussed in this chapter can

facilitate firms’ efforts to earn above-average returns. However, even when pursued

for value-creating reasons, acquisition strategies are not problem-free. Reasons for the

use of acquisition strategies and potential problems with such strategies are shown in

Figure 7.1.

Figure 7.1 Reasons for Acquisitions and Problems in Achieving Success

Reasons for Acquisitions

Overcoming

entry barriers

Cost of new

product development

and increased speed to

market

Learning and

developing new

capabilities

Lower risk

compared to developing

new products

Increased

diversification

Reshaping the firm’s

competitive scope

Large or

extraordinary debt

Integration

difficulties

Inadequate

evaluation of target

Inability to

achieve synergy

Too much

diversification

Managers overly

focused on acquisitions

Too large

Problems in Achieving Success

Increased

market power