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Unformatted text preview: ducts that are new to the firm.
• New ventures/products require an average of 8 years to
• About 88% of new products fail – Returns are more predictable because of the acquired
firms’ experience with the products.
– E.g., Medtronic
– E.g., Teva Pharmaceuticals + Cephalon
1–12 Acquisitions: Lower Risk Compared to Developing New Products
• An acquisition’s outcomes can be estimated
more easily and accurately than the outcomes of
an internal product development process.
– Managers may view acquisitions as lowering risk
associated with internal ventures and R&D
– E.g., Teva Pharmaceuticals + Cephalon 1–13 Acquisitions: Increased Diversification
• Using acquisitions to diversify a firm is the
quickest and easiest way to change its portfolio
• Both related diversification and unrelated
diversification strategies can be implemented
• The more related the acquired firm is to the
acquiring firm, the greater is the probability that
the acquisition will be successful.
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This note was uploaded on 04/28/2013 for the course MGMT 491 taught by Professor S.cho during the Spring '12 term at Washington State University .
- Spring '12