| Backgrounder: |
Most readers of this article will have been personally involved in at least one merger and or acquisition. Such is the level of business change many will have been involved in multiple M&A processes.
2006/7 were record years for M&A. The current year’s activity is clearly somewhat lower due to the prevailing economic conditions, however M&A transactions continue to be made and in the aftermath of every deal there’s the critical question of how to deliver shareholder value. As the academic studies consistently point out, most deals fail to create value for shareholders.
According to the Boston Consulting Group, “between 1992 and 2006 around 58.3 percent of all mergers and acquisitions not only failed to create shareholder value but actually destroyed it, resulting in a net loss of 1.2 percent across all transactions”.1
Yet notwithstanding the difficulties M&A is a core business strategy for most major corporations. According to Deloitte & Touche, “most elite, world-beating companies are built through savvy, well-executed, M&A strategies. Regardless of sector, getting to the top involves an astute management of a portfolio of businesses”.2
In this report we shall discuss mergers and acquisitions - the activity of corporate strategy, finance and management relating to the buying, selling and combining of different companies. Sometimes the term M&A is used in a context that includes disposals, but in this article we are focused specifically on the activities that can aid, finance, and help a company to grow rapidly without organic growth or the creation of a new business entity. |
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