ACQUISITIONS: Like Moths To the Flame

Like Moths To the Flame

The urge to merge often causes big businesses to splurge, buying operations that they wind up selling for a loss. So concludes Harvard Business School Professor Michael Porter in the latest issue of Harvard Business Review. Porter examined 1,601 acquisitions made by 33 major U.S. corporations from 1950 to 1980. By last January, he found, they had dumped 53% of the ventures, rarely at a profit.

Porter says companies either chose the wrong businesses or overspent for them. He gives low marks to CBS, which had shed 87% of the businesses it acquired in the 30-year period; and RCA, now a...

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