SPAVe Business Facts: ACHIEVING GROWTH IN A SLOW-GROWTH INDUSTRY THROUGH ACQUISITIONS- Corporate managers are under constant pressure to demonstrate successful growth. This is particularly true when the company and the industry have achieved growth in the past. However,when the demand for an industrys products and services slows, it becomes more difficult to continue to grow. When this happens, managers often look to M&A as a way to show growth. It often is hoped that such acquisitions will lead not only to revenue growth but also to improved profitability through synergistic gains. Unfortunately, it is much easier to generate sales growth by simply adding the revenues of acquisition target than it is to improve the profitability of the overall enterprise. In fact, one can argue that although acquisitions bring with them the possibility of synergistic gains, they also impose greater demands on management. Which now runs an even larger enterprise. Management needs to make sure that the greater size in terms of revenues has brought with it commensurate profits and returns for shareholders. If not, then the whole growth through M&A strategy has not improved shareholders positions and investors would have been better off if management had resigned themselves to be a slower growth company.
Posted on: Tue, 15 Oct 2013 15:41:57 +0000
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