Conflicting Objectives: The acquired company and the acquirer might have conflicting objectives. For example- the acquired company Yahoo might have an objective to enter into new markets while the acquirer company is in a pullback mode and does not want to explore new markets and rather have the objective to focus more on reducing the costs, this will definitely create a clash between the acquirer and the acquired companies as both have conflicting objectives.
Increased Debt: Increased debt is another very important disadvantage of any takeover or acquisition if the acquisition or takeover has been financed with the help of outside debt. In addition to this fact, the target company like Alibaba will have its own debt also and thus the overall debt in the books of the main company after the takeover or acquisition is expected to increase after the takeover. This increased debt will also require increased revenue to meet the increased interest expenses.
Saturation of Market: If the acquired company and the acquirer company are in same industry, the chances and hope of any type of market expansion will take a huge hit as both the companies together are already leading the market. Further market expansion and identification of new customers is not possible and this is also a disadvantage of these acquisitions and takeovers. This is not a case in Yahoo and Alibaba example (Azcentral, n.d.).
Thus when Yahoo acquired Alibaba, it must have got several benefits like international growth especially in markets like China and also a diversified product or business. It also got benefitted by restructuring its balance sheet and this acquisition also helped Yahoo to expand its revenue and business growth. Thus, it can be concluded that it was a win-win situation both for Alibaba and Yahoo.
However, there could have also been several disadvantages closely associated with this deal and this includes cultural clashes between the management of Alibaba and Yahoo. Also, it is quite possible that many employees of Alibaba or even from Yahoo might have been asked to leave the job to save duplication of roles and duplicate salaries for same roles and responsibilities. It is also quite obvious that the overall debt in the books of Yahoo would have increased after this acquisition which in turn would have increased the interest liability on the shoulders of Yahoo. Also, the actual and real objectives of both Yahoo and Alibaba might differ a lot as each company has its own objectives and am sure that this might also have brought in several clashes and conflicts between these two companies in the initial stages (Moneymorning, n.d).