A software firm is interested in acquiring an app development company that is small but highly profitable. The app developer also has a widely admired management structure and much lower attrition rates than are common in the industry. Which of these problems should the software firm anticipate?

Question

Quizplus · Accepted Answer

The M&A performance track record is rather mixed. Many mergers destroy shareholder value because the anticipated synergies never materialize. If value is created, it generally accrues to the shareholders of the firm that was taken over (the acquiree), because acquirers often pay a premium when buying the target company. Indeed, sometimes companies get involved in a bidding war for an acquisition; the winner may end up with the prize but may have overpaid for the acquisition-thus falling victim to the "winner's curse."

A Software Firm Is Interested in Acquiring an App Development