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why are poorly performing firms are targets of takeover?

why are poorly performing firms are targets of takeover?

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Answer #1

Why are poorly performing firms are targets of takeover?

The poorly performing firms are a great target for takeover because the acquirer find value in the underperforming firm. The firm is poorly performing mainly because of the management. If the acquirer has confidence in their management then it can takeover the poorly performing firm and hopefully turn it around with its new management.

Another reason why poorly performing frims become a target for takeover is the assets of the firm will be valued at a very low price. So, by employing the new management to operate on the existing asset, the acquirer hopes to extract value.

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