Exxon is making a huge acquisition of Pioneer.  Chevron is buying Hess.  Kroger bought Albertsons.  Cedar Fair and Six Flags are merging.  These will all grow the revenues of the acquirer, and revenue growth is a good thing.  So are acquisitions a good strategy?

This podcast explains why the bulk of acquisitions are done for the wrong reason.  They are competitors trying to become the “last man standing” in a declining market.  And always – yes always – these do not end well.  It allows the buyer to sustain for a bit longer, but they don’t thrive and eventually they die.

On the other hand Microsoft has made a huge investment to buy Activision Blizzard.  This is being done for the right reason – to grow revenues.  For years Microsoft has lost money in gaming as the weakest competitor vs Sony and Nintendo.  But now Microsoft will launch into the top spot, and be positioned to grow much faster and finally make a return for investors.  Because this is an acquisition focused on growth, it is a very good thing.

Thinking Points:

• Do you make acquisitions for potential “synergies” or to invest for growth?
• Do you understand how markets are shifting, and will this acquisition create a new direction shifting with the market launching new products and services?
• If you own a business, and your market is shifting, are you ready to invest to keep up with the shift – or should you sell to someone who can invest?