Hi chuckyegg:
Thanks for the interesting question.
There is no one blanket statement that can be made like "mergers and
acquisitions add value" or "mergers and acquisitions do not add
value." The reality of the situation is that whether value is added
depends upon the detailed circumstances of each individual deal.
However, there have been studies done of whether *on average* mergers
and acquisitions add value to a company - and most of the ones that I
found seem to indicate that the majority of these deals do *not* add
value. Below I have quoted some sources I have found on this subject.
How Mergers Go Wrong
URL: http://marriottschool.byu.edu/teacher/mba680/godfrey/Successful%20Mergers%20&%20Acquisitions%202001.ppt
(slide 4)
Quote:
* 21 different studies examined (academic & consulting)
* Different metrics for success and failure
* Range of failures: 40 – 85%
* Evidence suggests that making them succeed is very difficult
* KPMG Study (2000):
* Over ½ destroy shareholder value
* Another 1/3 added no value
* Only 1/6 of mergers add value to firms
* Booz Allen Hamilton Study (1999):
* 51.3 % of M&A lost value vs. peers
* 48.7 % gained value
KPMG Identifies Six Key Factors for Successful Mergers and
Acquisitions; 83% of Deals Fail To Enhance Shareholder Value
URL: http://www.riskworld.com/PressRel/1999/PR99a214.htm
Quote:
"'More than 8 in 10 deals fail to enhance shareholder value because of
poor planning or execution or both, yet, by contrast, most of the
executives interviewed (82%) believed their deals were successful,'
said Donald C. Spitzer, the U.S. national partner in charge of the
Global Financial Strategies(SM) practice of KPMG LLP, the U.S.
accounting, tax and consulting firm. 'This is an extraordinary
finding, and noteworthy because transactions remain the most dynamic
driver for growth among corporate executives.' KPMG estimates that a
record $2.2 trillion in global M&A activity will be recorded in 1999."
The year of the merger
URL: http://news.bbc.co.uk/1/hi/business/237005.stm
Quote:
"History shows that few mergers add value to company performance and
often lead to complacency, but this round of mega-mergers has been
much more defensive - the object more self-preservation from
intensifed competititve pressures - and thus driven by necessity."
Finding the balance between empathy for employee's fears and the need
for productivity in a healthy business
URL: http://216.147.60.172/financial/article105.html
Quote:
"In Why Mergers Fail published in the fourth quarter 2001 issue of the
McKinsey Quarterly, 'history shows that few mergers add value'. A
Southern Methodist University study of 193 mergers, from 1990 to 1997,
found that by the third quarter only 11% had avoided a slow down.
Halted revenue growth (productivity) hurts the market performance of a
company far more than does a failure to reduce costs. When McKinsey
joined the SMU researchers to look closer, it turned out that the
acquired firms continuing under performance explained only half of the
slow down. Unsettled customers and distracted staff explained the
rest."
Merger mania and stock buybacks prove the market is healthy
URL: http://www.cornerstoneri.com/notable/mergers.htm
Quote:
"'Most of the research indicates that between 60% and 80% of mergers
are financial failures… A lot of mergers go awry because the acquirer
either pays too much in the first place or doesn’t adequately mesh its
operations with those of the acquired company… In one study done in
1992, at least 44% of the companies that were acquired were later sold
off – often at a loss…' - Merger Mayhem, Barron’s, 4/20/98"
Mergers and Acquisitions—Synergy Can Equal Success
URL: ://www.google.ca/search?q=cache:iGSVsfzQFU0C:www.reveregroup.com/exchange/articles/ingle.htm+%22mergers+and+acquisitions%22+%22add+value%22&hl=en&ie=UTF-8
Quote:
"When projecting the efficiencies and payback from traditional or
platform-based M&As, many executives are not aware of the strategic
role IT plays in creating business value. This is evidenced by a
recent Wall Street Journal article which reported that more than half
(58%) of 115 mergers completed around the globe between 1993 and 1996
failed to 'add value,' according to research from consultants at A.T.
Kearney. A similar study by Mercer Management Consulting revealed that
57% failed to add value, while research by J.P. Morgan found that 44%
did not add value after three years."
Empirical Evidence
URL: ://www.google.ca/search?q=cache:dLSuc7MEkssC:frankschmid.com/ma15.pdf+%22mergers+add+value%22&hl=en&ie=UTF-8
Quote:
"Repeated analyses by business gurus, management consultants and
investment bankers have all reached the same conclusion: in the medium
term, fewer than half of all mergers add value."
Note: There are many other useful stats at the end of this document.
Who gets the value from an acquisition? Again, this depends on the
acquisition. One account I found sided with the acquired company
getting the added value (if any):
Georgia-Pacific counts on building
URL: http://www.savannahmorningnews.com/exchange/archives/weekof022899/PULindex.html
Quote:
"He said a common mistake in acquisitions is that not enough value
ends up in the hands of shareholders of the company that's doing the
buying. 'A lot of acquisitions and mergers add value, but it goes to
the acquired company,' he said.
However, I've personally been involved in a couple of "hostile"
acquisitions, and I can tell you that no-one really won, least of all
the acquired company.
If whether a merger or acquisition adds value or not has to be taken
on a case by case basis, then what are some of the key things that can
be done to ensure success? The following pages discuss some strategies
and measurement techniques that might be of interest.
Mergers
URL: http://www.nwfusion.com/forum/1117current.html
Lecture 10 - Finance and Industry, Corporate Governance, Mergers and
Acquisitions, Diversification
URL: file:///C:/WINDOWS/Temporary%20Internet%20Files/Content.IE5/SLI3OXYJ/babs-II-eof-10%5B1%5D.ppt
(slides 17 - 24)
Bell Atlantic and Nynex Merger
URL: http://www.morevalue.com/glossary/restrict/MA-Bell%20Atlantic%20and%20Nynex.html
KPMG Identifies Six Key Factors for Successful Mergers and
Acquisitions; 83% of Deals Fail To Enhance Shareholder Value
URL: http://www.riskworld.com/PressRel/1999/PR99a214.htm
I hope that this information has been of help in your search.
If you need any clarification of the information I have provided,
please ask using the Clarification feature and provide me with
additional details as to what you are looking for. As well, please
allow me to provide you with clarification(s) *before* you rate this
answer.
Thank you.
websearcher-ga
Search Strategy (on Google):
"mergers add value"
"merger adds value"
KPMG mergers value
mergers value acquired
mergers "add value" "acquired company" |
