Acquisitions: The New Norm?: Facebook Inc (FB), Apple Inc. (AAPL)

Disney is a fundamentally strong company and has a rather large amount of cash on its balance sheet. In order to keep growing, it is using this cash to acquire other great brands that can make a lot of money for the company and help it continue to grow. Apple Inc. (NASDAQ:AAPL) is making acquisitions to make itself more profitable and to bring new ideas and products into its playing field. There is, however, a difference between a company that is making acquisitions to grow and a company that is making acquisitions to keep others from growing. If a company (like Facebook Inc (NASDAQ:FB)) sees a company (like Instagram) as a threat, instead of innovating to make itself better, it simply buys the competitor out. This can be a very scary road for a company to go down. It could be a sign that the company views itself as unable to compete very well and therefore has to follow a mindset of “If you can’t beat ’em, buy ’em.” That is a good way for a company to burn through a lot of cash very quickly.

Bottom line

Before jumping on the investor band wagon next time you hear about an acquisition, ask yourself what it tells you about the company and where it’s going.

The article Acquisitions: The New Norm? originally appeared on Fool.com and is written by Nathaniel Munson.

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