Mergers Fail to Deliver Shareholder Wealth
A significant study by A. T. Kearney challenges the widely held notion that large-scale mergers are a key to creating shareholder wealth. The management consulting firm analyzed 115 multibillion-dollar mergers worldwide between 1993 and 1996, revealing a bleak picture of merger success. Despite the expectation of increased shareholder value, the study found that a substantial majority of these mergers failed to deliver the expected benefits.
Key Takeaways:
- A. T. Kearney's study of 115 multibillion-dollar mergers found that 58% failed to produce any extra benefit for shareholders compared to their peers in the same industry.
- Only 38% of the mergers produced some level of extra benefit for shareholders. (Traem, 1997)
- An even greater share, 62%, of the companies failed to outperform their peers in terms of profit growth after the mergers.
- 75% of the companies failed to meet the "strategic goals" that motivated their mergers.
- Mergers of equals were less successful than acquisitions of smaller companies.
- 74% of top-performing acquirers had carried out more than three mergers in the previous five years and were from related businesses.
- 80% of the successful mergers involved companies in related businesses, suggesting that industry consolidation is key to success in mergers and acquisitions.
Statistics:
- 58% of mergers failed to produce any extra benefit for shareholders (Traem, 1997)
- 62% of companies failed to outperform their peers in terms of profit growth after the mergers (Traem, 1997)
- 75% of companies failed to meet the "strategic goals" that motivated their mergers (Traem, 1997)
- 74% of top-performing acquirers had carried out more than three mergers in the previous five years (Traem, 1997)
- 80% of successful mergers involved companies in related businesses (Traem, 1997)
Sources:
- Traem, M. R. (1997, May 25). Mergers Fail To Deliver Shareholder Wealth. The New York Times.