When doing capital allocations, managers should focus on increasing intrinsic value per share – however, “in contemplating business mergers and acquisitions, many managers tend to focus on whether the transaction is immediately dilutive or anti-dilutive to earnings per share.”
Besides, major acquisitions can be “a bonanza for the shareholders of the acquiree; they increase the income and status of the acquirer’s management; and they are a honey pot for the investment bankers and other professionals on both sides.”
Option rewards for managers and return cash to shareholders can conflict.