Acquisitions: The Promise and the Problem

Acquisitions and mergers1 are about growth — often rapid growth. Of the three major routes (see Figure 1.1) a firm can choose if it wants to grow quickly, the growth-through-acquisitions route offers the greatest possibilities. Organic growth can be slow: market penetration can be difficult against established competitors and it can take many years for a company to reach any appreciable size. Growth through innovation can be costly: it carries a high risk of technical failure, and at the time of making the capital investment there is no certainty of demand for the capacity created.