Where M&A Pays and Where it Strays
Robert F. Bruner, DEALS FROM HELL, New York: John Wiley & Sons, 2005
54 Pages Posted: 24 Jan 2005
Abstract
How you assess an M&A deal or the whole flow of M&A activity depends on your frame of reference, on beliefs that help you decide whether specific deals represent the average or what statisticians call the tails of the distribution. This frame of reference is a hugely important filter for decision-makers and their advisers, and is typically built on a blend of personal experience, anecdotes, conventional wisdom, and facts. The aim of this chapter is to enrich your frame of reference about success and failure in M&A with the findings of scientific research. Surveyed here are the results of over 130 studies of returns from merger. On average, acquisitions compensate buyers for their cost of funds - in this sense, it appears that M&A pays. But around the average is significant variation in outcomes. This chapter summarizes findings on 18 factors that help to explain the variation in returns to buyers from M&A. One practical implication is that all M&A is local which means that the executive's choices about strategy, deal design, governance, and tailoring of investment opportunities will have a meaningful influence on the success or failure of acquisitions.
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