Studies reveal that over one-half to two-thirds of acquisitions are failures primarily because
A) the premiums paid were too high for the firm to earn their cost of capital.
B) due diligence was not conducted.
C) the premiums were too high to finance and resulted in bankruptcy.
D) there were unresolved management conflicts.
E) there was a clash of management philosophies.

Question

Quizplus · Accepted Answer

Studies have shown that one of the primary reasons for acquisition failures is paying too high premiums, which results in the firm not being able to earn their cost of capital. This makes it difficult to achieve the expected returns and creates an issue for the firm's financial health. Other reasons such as conflicts in management and philosophies, due diligence not being conducted, and financing issues can also contribute to acquisition failures, but paying high premiums is the most significant reason.

Studies Reveal That Over One-Half to Two-Thirds of Acquisitions Are