Separately firms experience transaction costs when

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Unformatted text preview: ebt can: – Increase the likelihood of bankruptcy – Lead to a downgrade of the firm’s credit rating – Preclude investment in activities that contribute to the Preclude firm’s long-term success such as: firm’s • Research and development • Human resource training • Marketing 1–22 Problems in Achieving Acquisition Success: Inability to Achieve Synergy • Synergy – When assets are worth more when used in When conjunction with each other than when they are used separately. separately. • Firms experience transaction costs when they use Firms acquisition strategies to create synergy. acquisition • Firms tend to underestimate indirect costs when Firms evaluating a potential acquisition. evaluating • Private synergy: combining assets yields Private capabilities and core competences capabilities 1–23 Problems in Achieving Acquisition Success: Too Much Diversification • Diversified firms must process more information Diversified of greater diversity. of – Increased...
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