Gustavo Ballvé on December 5th, 2011
Corporate Governance, Corporate Strategy, Food for thought, Home, Mental models

When we commented on share buybacks recently, we alluded to the “bad name” that M&A has received. We mentioned that, on average, M&A “destroys value” as defined by some academic studies and as seen in real life all too often. There are psychological and incentives-driven explanations all around for this phenomenon. Our point was that share buybacks were unfairly seen as a much better capital allocation decision “by definition”, while it also entails plenty of risks. We’ve now come accross a Strategy & Business article listing “the top-10 M&A fallacies and self-deceptions” – 5 of each – and it’s a good if not all-encompassing list of reasons why M&A may go wrong, or may not be the best choice.

Change a few words and some of the 10 points can be used to consider share buybacks as well.

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