Which of the following is a reason for merger and acquisition failures?
a. The acquiring company pays too low a price for the common stock of the target company.
b. The acquired company assets are integrated into the acquiring company business lines.
c. The acquisition leads to value creation.
Answer: The correct answer is "a. The acquiring company pays too low a price for the common stock of the target company.".
Explanation: It is a reason for failures because if the company pays less than the proportional equity value that it is buying according to the amount of shares purchased it indicates that a negative business key must be recognized, which is related to the expectations of expected losses or future expenses of the entity acquired.
