Question

What are the problems associated with implementing a strategy of related diversification through acquisitions?

Answer 1

Acquisition is a diversification strategy. It is one of the complicated strategy to implement. Following are some challenges which any organization might face in the implementation of Acquisition.

• There may be some culture issues. Different organizations have different culture and it is difficult to make the existing employees to adjust with new ones or vice versa.
• No doubt, acquisition demands lot of money. It is one of the expensive diversification. Other than the purchasing cost or purchase consideration, there are other expenses as well, such as lawyer expenses, court charges, some paper work fee etc. Hence the total actual cost of acquisition sometimes exceeds the budgeted ones.