Why do so many firms continue to use an acquisition strategy?
In the present day globalized environment, the significance of acquisitions as the key method of making a company competitive enough is extremely high (Ulijn, Duysters & Meijer, 2010). True, for most SMEs and even for larger companies, acquiring the stocks and shares of other corporations does not lead to an immediate rise of the firm’s revenues. However, creating mergers and acquiring the shares of other companies allows for increasing diversification. The latter, in its turn, defines a company’s financial safety. Therefore, acquisitions can be seen as a part of a company’s insurance strategy. More to the point, acquisitions allow for increasing the company’s competitiveness, which is crucial from the firms that enter the global market.
Will an acquisition result in increased strategic competitiveness for the acquiring firm?
Because of acquisitions’ efficacy, a range of companies use the acquisition strategy nowadays. In fact, a major acquisition is currently being underway – the Sprint Company and T-Mobile have announced that they are going to merge (Sprint and T-Mobile merger could shake up the 2015 FCC spectrum auction, 2014). Though the responses towards this news have ranged from positive to absolutely disapproving, the prognosis is rather favorable for both companies. Not being adapted to the global market environment, the companies are not quite competitive on their own. Therefore, a merger will contribute to the safety of their stocks and shares.
Reference List
Sprint and T-Mobile merger could shake up the 2015 FCC spectrum auction (2014). Latin Post. Web.
Ulijn, J. M., Duysters, G. & Meijer, E. (2010). Strategic alliances, mergers and acquisitions. Northhampton, MA: Edwar Elgar Publishing.