The Synergy Trap, Asia-Pacific Edition
"Every CEO and Corporate Director who has been in the path of the 'WOW! GRAB IT!' acquisition locomotive should read this book!"
-- Charles R. Shoemate,
Chairman and CEO, Bestfoods
With global acquisition activity running into the trillions of dollars, the acquisition alternative continues to be the favorite corporate growth strategy of this generation's executives. Unfortunately, creating shareholder value remains the most elusive outcome of these corporate strategies. After decades of research and billions of dollars paid in advisory fees, why do these major decisions continue to destroy value?
Building on his groundbreaking research first cited in Business Week, Mark L. Sirower explains how companies often pay too much -- and predictably never realize the promises of increased performance and competitiveness -- in their quest to acquire other companies. Armed with extensive evidence, Sirower destroys the popular notion that the acquisition premium represents potential value. He provides the first formal and functional definition for synergy -- the specific increases in performance beyond those already expected for companies to achieve independently. Sirower's refreshing nuts-and-bolts analysis of the fundamentals behind acquisition performance cuts sharply through the existing folklore surrounding failed acquisitions, such as lack of "strategic fit" or corporate culture problems, and gives managers the tools to avoid predictable losses in acquisition decisions.
Using several detailed examples of recent major acquisitions and through his masterful integration and extension of techniques from finance and business strategy, Sirower reveals:
The Synergy Trap is the first expose of its kind to prove that the tendency of managers to succumb to the "up the ante" philosophy in acquisitions often leads to disastrous ends for their shareholders. Sirower shows that companies must meticulously plan -- and account for huge uncertainties -- before deciding to enter the acquisition game. To date, Sirower's work is the most comprehensive and rigorous, yet practical, analysis of the drivers of acquisition performance. This definitive book will become required reading for managers, corporate directors, consultants, investors, bankers, and academics involved in the mergers and acquisitions arena.
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The Acquisition Game
Can You Run Harder? Synergy
Do You Feel Lucky? The Acquisition Premium
Tools and Lessons for the Acquisition Game
AN ANALYSIS OF CORPORATE
Discussion of Results
Implications of the Analysis
acquiring firm performance acquisition game acquisition performance acquisition premium acquisition strategies already expected analysis announcement assets Boston Consulting Group challenge Company Name Business competitive competitors conflicting evidence consider Consult contested Corp cost of capital Cross-Sectional Regression distribution economics empirical equity escalation of commitment executive teams formance free cash flow hubris Hypothesis industrial integration investment Jemison Lubatkin main effect major acquisitions managerial managers mance market value measures ment mergers and acquisitions million mium multiple bidders MV/BV Name Business Description negative net present value null hypothesis Operates payment payoffs percent performance gains post-acquisition post-merger potential pre-acquisition predict premium paid problem quisition related acquisitions relative Relindx Relsize required performance improvements resource-based view risk taking RPIs sample scenario significant Snapple strategic relatedness synergy trap takeover target firm tender offers tion tive Unisys unrelated acquisitions variable winner's curse
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