Multiple acquisitions

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    Jass Lim

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



    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.


    Terry Koh

    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.



    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.


    Henrik Jernstrom

    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).


    Thomas Teltscher

    I think every company will need to decide which mix of organic growth vs M&A to choose. However, I doubt choosing only one or the other will be the best option. Growing only via M&A may lead to reducing the thresholds / expectations as there are only so many great deals available. Further, companies relying heavily on M&A may become more efficient at it, but at the same time may overstress their internal resources.



    I don’t think there is any right or wrong strategy for any company, it’s all about how that strategy is being managed and whether you are capable of turning that strategy into value. If you manage that you are a success.


    Sebastien Perroud

    I think companies looking to grow by acquisition only want to grow faster than organic growth would allow them. Depending on the type of industry in which these companies operate, organic growth can lead to low growth, while acquisitions can quickly expand the product portfolio or open up new markets to grow faster.



    that they usually have strong cash flow.

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