The need for growth sparks companies’ desire to acquire other businesses. Growth tends to promote a higher stock price, which helps a firm to retain good employees and to sustain operations. In this chapter, we look at the 10 principal motivations.
Most businesses strive for consistent increases in sales and earnings, as depicted in Figure 3.1. Upward-trending track records bring publicly traded firms higher-than-average price earning (P/E) ratios, premium stock prices, attractive financing offers, new business proposals, and many acquisition opportunities. Much of the same holds true for similarly situated private enterprises. Success breeds success.
Companies make acquisitions in order to grow. Growth is critical to a profit-seeking enterprise for several reasons:
Fundamentally, a business has three strategies ...