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from BUSINESS LINE, October 27, 2008 Acquisitions are where management theory is seriously in conflict with management practice. A number of research articles have shown that more than 75 per cent of acquisitions have failed to achieve their objectives, yet acquisition as a strategic manoeuvre is as popular as ever. When a public company gleefully announces a forthcoming acqui sition, its share price drops substantially, indicating that investors have a better understanding of the acquiring game.
Why do acquisitions fail? Typically there are two reasons: One, the price paid by the acquiring company is far higher than justified by the business fundamentals of the acquired company. Two, after the deal is done, the acquiring company spends very little time in managing or integrating the acquired enterprise. To bring out the synergies so enthusiastically talked about while justifying the acquisition, a lot of focused effort is needed but is usually taken for granted.
When the odds are stacked against success, managers …