Constituencies, Conflict, and Cost-Benefit Analysis as Factors in Acquisition Strategy

The 1981–1982 acquisitions by mammoth corporations, mostly to diversify, raise questions as to whether such moves benefit the surviving stockholders or the economy. Do such transactions at premium prices reflect only management's eagerness to seize available opportunities? Shouldn't the affected constituencies of these corporations, that is, the stockholders, employees, retirement fund beneficiaries, consumers, and taxpayers, be recognized in a benefit/cost analysis framework to ensure that acquisition transactions are sound? The recent rash of acquisitions of banks and savings and loan associations by both financial and nonfinancial interests, and the acquisition of major insurance operations by firms remote from that industry raise further questions.