Why do firms make acquisitions? Provide an example of how a successful acquisition increased or protected shareholder value.
What will be an ideal response?
Student examples will vary. A sample answer follows.
Firms make acquisitions for two main reasons:
To gain access to a new capability or competency
To preempt rivals
Large existing firms often engage in serial acquisitions to maintain a window on the latest technology developments. These companies acquire small startups to not only gain access to a new capability or competency, but also to preempt rivals from doing so.
An example of a successful acquisition is Alphabet's takeover of Waze. Having access to Waze's technology has helped Alphabet to maintain its dominance in online maps. The acquisition also prevented Alphabet's competitors from accessing the Waze technology.
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