Practice Makes Perfect? Study Says Repeat Buyers Post Better Returns
I think most M&A lawyers would agree that working with experienced people usually results in a much smoother transaction process than what you experience working with folks who are new to the M&A game. When it comes to getting a deal done, there’s just a lot to be said for experience. A recent McKinsey study says that experience also matters a lot when it comes to getting the most out of an acquisition. Here’s an excerpt:
Nearly a decade ago, we set out to answer a critical management question: What type of M&A strategy creates the most value for large corporations? We crunched the numbers, and the answer was clear: pursue many small deals that accrue to a meaningful amount of market capitalization over multiple years instead of relying on episodic, “big-bang” transactions. Between 1999 and 2010, companies following this programmatic approach to M&A generally outperformed peers.
That pattern is even more pronounced in today’s fast-moving, increasingly uncertain business environment. A recent update of our research reflects the growing importance of placing multiple bets and being nimble with capital: between 2007 and 2017, the programmatic acquirers in our data set of 1,000 global companies (or Global 1,000) achieved higher excess total shareholder returns than did industry peers using other M&A strategies (large deals, selective acquisitions, or organic growth). What’s more, the alternative approaches seem to have under-delivered. Companies making selective acquisitions or relying on organic growth, on average, showed losses in excess total shareholder returns relative to peers
The study suggests a number of factors account for the success of programmatic M&A, including effective integration of M&A planning with the company’s overall strategy, incorporating integration planning into the due diligence process, careful consideration of cultural issues, and an approach that views M&A as an enduring capability rather than a one-off project or occasional event.
-John Jenkins, DealLawyers.com July 30, 2019
Want to keep reading?
Great. Enter your email address and gain instant access to this article