I need detailed long answer, more than 1 page, with references. True/ False - On average,...

I need detailed long answer, more than 1 page, with references.

True/ False - On average, acquisitions destroy shareholder value

Identify a corporate acquistion (within the last 10 years) which added value to the acquiring company and discuss a minimum of three (3) key factors which enabled their success?

Expert Solution

Yes, there is definitely a proof and a perception that acquisitions have generally led to destruction of shareholder value as the acquirer company ends up paying more tha the fair value in a bid to acquire the target firm and this leads to destruction of value for the shareholders. This effect is visible in the form of a reduction int eh market capitalisation of the acquiring firm immediately after an acquisition has been announced.

An acquisition which has worked well for the acquiring firm has been the acquisition of "WhatsApp" by Facebook. This acquisition has been of strategic value for Facebook, since it has added the following aspects to the company:-

1) Addition in customer base - With acquisition of "WhatsApp", the number of customers using the platform has increased manifold which is likely to benefit Facebook due to the network effect.

2) Penetration into newer markets such as India: With acquisition of "WhatsApp", Facebook is likely to get a bigger share of the emerging market such as India which has a large population base.

3) Ability to launch fintech services: Using "WhatsApp" messaging platform, the company can launch newer platforms and diversify into payments business and launch a fintech offering thereby diversifying revenue.

jeff jeffy answered 1 year ago

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