Here are some of the most important pros and cons you should

weigh when considering growth through acquisition for your

PROS
1. Speed. Acquisition is one of the most time-efficient growth
strategies. It offers the opportunity to quickly acquire resources
and core competencies not currently held by your company.
There is near-instantaneous entry into new product lines and
markets, usually with a recognized brand or positive reputation,
and existing client base. In addition, the risks and costs typically
associated with new product development can drop dramatically.
2. Market power. An acquisition will quickly build market
presence for your company, increasing market share while
reducing the competition’s stronghold. Where competition has
been particularly challenging, growth through acquisition can
reduce competitor capacity and level the playing field. Market
synergies are achieved.
3. New resources and competencies. Businesses may choose
acquisition as a route for gaining resources and competencies
currently not held. These can have multiple advantages, ranging
from immediate increases in revenues to improving long term
financial outlook to making it easier to raise capital for other
growth strategies. Diversity and expansion can also help a
company to weather periods of economic or market slump.
4. Meeting stakeholder expectations. In some cases,
stakeholders may have expectations of growth through
acquisition. While not all stakeholders will insist on acquisition in
particular as a growth strategy, under nearly all circumstances,
stakeholders are looking for returns on any investment or other
advantages for non-investing stakeholders. When there is
pressure to perform and meet expectations for returns, an
acquisition can often yield results more quickly than other means
for growth.
5. Financial gain. Acquiring organizations with low share value
or low price earning ratio can bring short-term gains due to assets
stripping. Synergy between the surviving and acquired
organizations can mean substantial cost savings as well as more
efficient use of resources for soft financial gains.
6. Reduced entry barriers. Acquiring an existing entity can
often overcome formerly challenging market entry barriers while
reducing risks of adverse competitive reactions. Market entry can
otherwise be a costly proposition, involving market research
among other upfront expenses, and take years to build a
significant client base.
CONS
1. Financial fallout. Returns may not benefit stakeholders to the
extent anticipated, and the expected cost savings may never
materialize or may take far too much time to materialize due to a
number of developing factors. These might include a higher-than-
anticipated price of acquisition, an unusually long timeframe
for the acquisition process, lost of key management personnel,
lost of key customers, fewer synergies than projected and other
unforeseen circumstances.
2. Hefty costs. Under some circumstances, the cost of
acquisition can climb steeply, well beyond earlier projections.
This is particularly true in situations of hostile takeover bids. In
some situations of runaway costs, the added value may not be
enough to justify the cost in dollars and resources that went into
making the acquisition happen.
3. Integration issues. Integration of the acquired organization
can bring a number of challenges. Company cultural clash can
erupt and activities of the old organizations may not mesh as well
as anticipated when forming the newly combined entity.
Employees may resent the acquisition, and undercurrents of
anxiety and anger may make integration challenging.
4. Unrelated diversification. When an acquisition brings
together diverse product or service lines, there can be difficulties
in managing resources and competencies. Management of
employees and departments can face extreme hurdles and the
time necessary to address such issues may deplete much of the
value otherwise brought about by the acquisition.
5. Poorly matched partner. Unless he or she has extensive
firsthand experience in implementing acquisition as a growth
strategy, a business owner who does not seek professional
advice in identifying a potential company for acquisition may
target a business that brings too many challenges to the
equation. A failed acquisition can rob an otherwise healthy
organization of
6. Distraction from operations. When the acquisition faces too
many challenges or the timeline for completion stretches out
longer than anticipated, too much of the managerial focus is
diverted away from internal development and daily operations.
The post-acquisition organization can be harmed due to lack of
managerial resources, resulting in fewer synergies or at the least,
delays in savings realized from synergies.