Multiple acquisitions

This topic contains 4 replies, has 5 voices, and was last updated by  Henrik Jernstrom 2 days, 17 hours ago.

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  • #116140

    Jass Lim
    Participant

    What do you think about companies that seek to expand only via acquisitions, rather than seeking to expand organically.

    #116204


    Participant

    I think it is valid strategy, especially when the company becomes efficient at acquisitions. Companies get in trouble when the focus on acquisitions but cannot find a target and then go the organically grown route with no experience. But the same can be true for companies that focus on organic growth and then do the occasional acquisition.

    #116206

    Terry Koh
    Participant

    One reason could be for the sole purpose as an investment vehicle to generate investments. A great example is a Special Purpose Acquisition Company (SPAC) where its sole purpose for existence is to do acquisitions.

    #116253


    Participant

    If they are good at acquisition/integration, it is also a valid way to grow. It may be difficult to grow organically in some industries/areas.

    #116259

    Henrik Jernstrom
    Participant

    Conglomerates have been successful in playing the multiple arbitrage, where they acquire companies at a lower multiple than what themselves are trading at. When the profit of the acquired company is added to the acquirer’s profit, this is valued at the higher multiple. This is one type of company / strategy that is only focusing on acquisitions and being successful (then one can wonder why the equity market is not seeing through this arbitrage).

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