When you're a big enough company that you can pull it off and you have market share to protect, acquisitions make sense. But that's no substitute for putting valuable R and D dollars on the line to stay ahead of the curb with in-house products and designs.
Making acquisitions just to gain market share often fails with technical companies. Trying to merge the product lines and corporate cultures is often impossible, so the weaker (or sometimes stronger) product lines lose support -- resulting in lost market share -- and your best people get fed up with the new corporate culture and go elsewhere, weakening future prospects.
My favorite example of a merger disaster is the Daisy/Cadnetix (Dazix) merger in 1988 which resulted in Chapter 11 in 1990.
OTOH, Maxim/Dallas and TI/National seem to be going OK.
Intel had it too easy for about 10 years when their lead in manufacturing ensured lower costs and consolidated the virtual monopoly on x 86. But this means that design innovatons were not all that important any more. Now Intel is paying the price by not being able to break into the Mobile market with their own designs. But they do have a large bank balance hence the attempt to buy designs by acquiring companies like Mindspeed. But being able to set a proprietary standard like the good ole days of x86 seems very unlikely.
It is striking how often one sees companies writing off the bloated prices they they paid to acquire other companies. I wonder how much is associated with being unable to merge the two corporate cultures - and how much is associated with intentionally taking a competitor out of business.
I would hazard a guess that it might have to do with the bonuses that the companies' executives get if the merger goes through. In how many cases does "due diligence" mean being careful to look the other way so you don't see something that would cause the merger to fail? JMO/YMMV
Possible, but risky. How many shareholder lawsuits have been based on the notions that executives should have seen problems when they did the due diligence that wound up causing major problems for the combined entity?
Look the other way now to get a big bonus, and pay several times that later on in fines because you were caught at it isn't an attractive way to proceed.
I'd hazard that a lot more of this is being so enamoured of their bright idea that they simply can't see the possible downsides, untel they get bit on the ass.
Most of what passes for rational thought consists of coming up with good reasons after the fact for why what we already decided to do is not only a good idea, but the best possible move under the circumstances. It applies to due diligence, too. Dollar sign blinders provide all too effective tunnel vision.