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More to the Story

Assuming that you decide to create a strategy of investing in companies right after acquisitions, what are some of the factors that may undercut your chances of success? The factors to consider will clearly vary in accordance with the investment strategy you adopt. If you buy acquisitive firms, you will have to worry about both financial overreach (paying too much for acquisitions) and operational overreach (where you expand too quickly into new businesses, putting existing businesses at risk). If you buy potential target firms, you have to allow for the fact that they may never be taken over and that you will be saddled with a portfolio of poorly performing stocks.

Investing in Acquiring Firms

Consider investing in a portfolio of acquisitive firms. Even if you are careful about picking firms that seem to have succeeded with their acquisition strategies, there is a number of possible risks in the strategy.


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