Posted: March 7th, 2017

Your Company is loaded with cash from its profitable software business and it likes to use its money to take over other companies.

Your Company is loaded with cash from its profitable software business and it likes to use its money to take over other companies. Unfortunately, while your firm has lots of software experts they don t have any finance experts and their acquisition strategy is simply to identify takeover targets and then offer the target 5 billion (all of the potential targets are worth something in that range). Sometimes this acquisition strategy succeeds and sometimes the company is turned down. After a couple of years of this strategy, your firm s earnings, profits and excess cash have all declined markedly. Why? Use strategic decision making concepts, not corporate finance, to answer this question.