As mentioned earlier the acquisition of a company requires extensive financing. This places a high financial burden on the consolidated company. As a result the returns for the company on the investment can be unfavorable due to the strong outlay of funds invested in the acquisition. The profitability of the company as a result can be negatively affected. Aside from this the consolidated company ha to adhere to and abide by the laws and the regulations of the local/ domestic market as stated by the government.
This is in addition to the rules of acquisition which have to be adhered to. Aside from this the acquisition strategy can also result in high level of complexity in the operation as well as in the decision making in the business. The company also faces increased risk, and despite the fast entry into the market the post merger integration can be very slow. Aside from this the acquisition can also result in a too highly defined target market or a too wide market which cannot be appropriately targeted. There can also be overly optimized strategies as well as the overestimation of the market potential resulting in a loss for the consolidated company. High levels of due diligence are required to complete the acquisition and the different or incompatible organizational cultures pertaining to the domestic company acquired and the entering new company can lead to extensive problems in the work flow as well as the decision making for the business.
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