The conventional wisdom [on mergers and acquisitions] has crystallized into “buyer beware,” which is certainly not bad advice but not particularly helpful. (When would one ever think it is good not to beware?) Research on the topic is largely consistent with this view, observing that acquirers, on average, earn about the going rate of return on their investments but are subject to wide variation, sometimes doing very well, sometimes spectacularly poorly.
Unfortunately, the demonstrated riskiness of deals is not reason enough to eschew them. Mergers and acquisitions are critical to many initiatives that can be essential to a company’s success and even its survival, from gaining access to new technologies to international expansion to competitive preemption to creating strategic options. Consequently, the question is not “Does M&A help?” but “Given my circumstances, and given the details of this deal, is this particular acquisition the best mechanism for achieving my goals as I understand them now, and how can I employ it most effectively?” Since circumstances and goals vary widely from company to company, and within a particular company over time, it comes as no surprise that evidence of a first-order relationship between M&A and performance is weak and elusive.
Authors: Michael E. Raynor, Mumtaz Ahmed
Source: Deloitte Review
Subject: Mergers & Acquisitions
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