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Opportunity Costs in Acquisitions

Company X is a four year-old advertising agency that has grown rapidly in the last two years. The company specializes in marketing for professional and semi-professional sports teams, but in the last two years they have branched out to additional markets, such as fitness clothing, energy foods, and sports equipment.

Company X has been successful enough that they now have the option of buying out a competing advertising agency, Company Y. That company is a long-time leader in marketing in areas similar to Company X. However, they also have many clients in new markets.

What are the opportunity costs if Company X executives decided to acquire Company Y?

What are the opportunity costs if Company X executives decide not to acquire Company Y?

Why do you think considering opportunity costs is such an important part of business decision-making?

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Solution Summary

468 words outlines opportunity costs for acquiring a new company. References included.