Question

(Merger and acquisitions M&A) How do cross sectional research studies view the performance of acquisitions in the short and long run?

Answer 1

• The performance of acquisitions in the short run had not been very encouraging. Short run had been filled with problems and pains due to:
  • Cash flows issues
  • Target not performing up to expectation
  • Leverage at the time of acquisition not being serviced later
  • Cultural issues
  • Employees integration issues
  • Cross border integration issues
  • Operational or monetary synergies not being realized as per expectation
  • Excessive valuation or goodwill paid
• In the long run most of the acquisitions have been by and large successful and encouraging. This is because:
  • Short term issues have settled down
  • Long term orientation and optimism
  • Target & acquirer gets fully integrated by then
  • Synergies do start appearing and realizing