A new report from Bain says that M&A is about to ride the upside of the latest business cycle. In the first of a three part series, it discusses some of the surprises it discovered researching M&A in 2000’s. For example, data from this study showed “unequivocally that dealmaking paid off during that 11-year period”.
Companies that were actively engaged in M&A outperformed inactive companies sales growth and profit growth, and shareholder returns. As a rule, the more experience a company has doing M&A, the greater the likelihood that its deals will be successful. Companies in our study that were inactive—no mergers or acquisitions during the period— recorded 3.3% annual total shareholder returns (TSR), see above figure.
Those that did between one and six acquisitions boosted their performance signifi cantly, to 4.5%, and those that did more than six topped 5% TSR. These seemingly modest differences in annual TSR add up to significant disparities over a decade. The top group, for example, had 21% higher returns than the inactive group. (Image Source: Bain Insights)