Sizing up M&A value. Now.
Go digital, go now, and go big
OVERVIEW
KEY FINDINGS
Our research found that three factors have the greatest influence on a successful M&A strategy, as measured by Total Return to Shareholders (TRS):
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Digital disruption: M&A in industries being most disrupted by digital tend to create more value than those in less-disrupted industries. For instance, median M&A TRS is highest in the banking and communications industries and lowest in oil, gas and utilities, and media and entertainment.
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Timing: Timing of an acquisition is the most reliable predictor of its success. Deals announced during the upswing of a macroeconomic cycle average 13 percent to 15 percent return compared with deals announced during a trough, which averaged -5 percent to 6 percent.
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Size: Deals involving greater than $15 billion and less than $25 billion in transaction value returned the most: between 18 percent and 20 percent. Deals outside that range delivered between 0 percent and 12 percent.
RECOMMENDATIONS
To enhance their chances of generating the greatest returns, acquisitive companies should keep three things in mind when considering their next move:
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Go digital
Companies should seek acquisition targets that would benefit from or are already introducing digital disruption into their industries. -
Go now
With the global economy currently in nascent recovery, now is the time to act. -
Go big
Avoid small, bolt-on deals or tuck-in acquisitions and make attractive targets in the sweet spot of $15 billion to $25 billion top priority.
AUTHOR
CONTRIBUTOR
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