There are several good ways to grow a company, but only about a third of firms actively use all the methods available to them, and this narrow focus widens the corporate gap between success and failure significantly.
“You should go for an acquisition when you cannot acquire the technology or specific human skills through other avenues – alliances, contracts, partnerships, licensing, joint ventures” says INSEAD’s Capron, the director of the ‘M&As and Corporate Strategy’ programme for executives. According to the study, firms acquiring resources in multiple ways are 46 per cent more likely to survive over a five-year period than those relying mainly on alliances, 26 per cent more likely than those focusing on M&A, and 12 per cent more likely than those sticking with internal development.
Capron and Mitchell devised a checklist of three questions CEOs should ask themselves before reaching for the corporate chequebook:
It’s also interesting to note the downside of the acquisition scenario: the study shows that nearly 70 per cent of all acquisitions fail. But they don’t start out that way.
Laurence Capron will teach an Executive Education programme at INSEAD on the Europe campus in Fontainebleau this autumn entitled ‘M&As and Corporate Strategy’.