According to the free-cash-flow theory of takeovers,many acquisitions are motivated by:

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According to the free-cash-flow theory of takeovers, many acquisitions are motivated by the belief that free cash flow will no longer be misused. This theory suggests that when companies have excess cash flow, they may use it inefficiently by investing in negative-NPV projects or hoarding cash, which lowers shareholder value. In this situation, another company could acquire the first company and use the excess cash flow more efficiently, resulting in a positive change in shareholder value. Therefore, the motivation behind many acquisitions is to prevent the misuse of free cash flow.

According to the Free-Cash-Flow Theory of Takeovers,many Acquisitions Are Motivated