Why do companies often prefer Mergers and Acquisitions for growth over inventing new products?

Companies frequently prefer Mergers and Acquisitions (M&A) as a strategy for growth over developing new products due to the perception that M&A typically has fewer operational risks when compared to the innovation process of creating new products.

Engaging in M&A allows companies to quickly acquire established businesses, their technologies, customer bases, and talented personnel. This strategy can reduce the uncertainties and risks associated with product development, which often entails extensive market research, product testing, and iterations that may or may not lead to favorable outcomes. In contrast, acquiring a company with a successful product or service presents a more straightforward path to revenue generation, as the risks associated with market acceptance and operational effectiveness have already been partly mitigated.

Furthermore, companies can leverage existing operational structures, market footholds, and distribution channels of the acquired companies, leading to a smoother integration and faster realization of synergies. This contrasts sharply with the often unpredictable nature of new product development, which can be resource-intensive and prone to failure.

The other options do not capture the core reasoning behind the preference for M&A: operational risks differ significantly in their contexts and implications, and while M&A processes do require significant investment, that factor does not trump the advantage of reducing uncertainty and leveraging existing