3 May 2018
When big acquisitions pay off
Large deals can destroy value — yet half created excess shareholder returns after two years when strategy and execution align.
Large deals can destroy value — yet half created excess shareholder returns after two years when strategy and execution align.
Big deals — those representing 30% or more of an acquirer’s market capitalisation — are complex and can destroy value. Scepticism is often wise.
Yet half of such deals over the past decade created excess shareholder returns after two years, and one-third significantly outperformed the industry average.
Success hinges on strategy: limited organic growth options, consolidated industries with scale economies, or clear strategic fit. Successful execution includes setting targets above diligence estimates, not assuming “best of both cultures,” and ensuring the CEO focuses on a few critical areas.
Authors (source attribution on original site): Ankur Agrawal, Cristina Ferrer, Andy West (McKinsey).