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(originally published by Booz & Company)


Deploying the M&A Counterattack

“Aggressive acquisition strategies may well be sensible in light of a new entry that can change the competitive dynamics in an industry but may be less successful otherwise,” the authors note. They also found that when a firm elected to purchase another company in response to a competitor’s acquisition, it fared much better if it branched out of its own business than if it made an intra-industry deal.

Overall, the study’s findings suggest that the optimal counterstrike in response to a rival’s acquisition is much more nuanced than previously thought. Rather than automatically launching takeovers of their own, the authors caution, managers should first consider alternative strategies such as partnering with other small or medium-sized firms or, in extreme cases, assenting to being bought by a competitor to ensure survival under the larger company’s umbrella.

Bottom Line:
How should a firm respond to an acquisition made by a rival? Instead of taking a knee-jerk approach that mimics a competitor’s aggression, managers should first base their response on whether the deal is being struck by a new entrant or an old rival. In the end, sitting tight may be the wisest choice. 

Author Profile:

  1. Matt Palmquist is a freelance journalist based in Oakland, Calif.


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