Acquisitions can turned into massive money losing events. As investors we should always be sceptical about things always working the way we want.
Here is a nice plug from Firmex which shows some of the worse acquisition disasters :
What investors can learn from this is to managed their expectations about acquisitions.
- Are the company extending themselves
- In the event that this fail, would it make the overall company a much poorer investement?
- Has the company successfully acquired and integrate parcels of business before?
- Would the financing put the company structure in a worse of state
- Is the IRR provided by the management realistic?
Here you can see a lot of rushed acquisitions, not enough diligence done verifying the fundamental data.
Locally I can remember OSIM acquisition of Brookstone being utterly bad. OSIM have come back strong, and i am sure they learnt a valuable lesson
But not all will be so lucky to learn from this.
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Nguyen Khac Viet Bach
Saturday 30th of March 2013
Another great article. Thank you very much Drizzt.
Only when a company which possess a competitive advantage acquires another company which also has related competitive advantage that such acquisition prove to add value for the shareholders. Moreover, it is essential that the acquirer do not overpay for its acquisition as well as not dilute its shares in the process.
Jack Nguyen
Kyith
Saturday 30th of March 2013
Yeah but not sure how much good will they should purchase it at. A lot of the acquisition are synergy based I guess you have to conservatively estimate that there is no synergy and it increase the number of sales channel