Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Research shows 2008 may be the best year for M&A

17.06.2008
New research from Professor Scott Moeller and Towers Perrin

Results from the latest stage the of ongoing Towers Perrin / Cass Business School research looking at the value created in the last three global M&A cycles reveals that, contrary to received wisdom, 2008 may be the best time to do a deal.

This most recent part of the study looked at the performance of companies before and after peak years of the cycles. Together with Towers Perrin, Scott Moeller, Professor of Mergers and Acquisitions at Cass, examined the two prior merger waves and found the post-peak years (1990 and 2000) delivered higher shareholder value compared with deals in the frenzy of the M&A booms. This was true for all deals, although the research focused on those between $400 million and $1.5 billion in size (adjusted for inflation).

Combining the two waves gives a clear and statistically significant picture of performance in pre-peak, peak and post-peak years. The post peak years show the performance outperformed the MSCI World Index by 5.4% on average over the two periods.

Over the past three years, the Towers Perrin / Cass Business School M&A study has found that, unlike the two previous M&A cycles, the current deal wave has seen companies creating rather than destroying value. All the evidence points to this trend continuing and therefore suggests that the post-peak year in the current merger wave will continue as the previous two and also add value.

Marco Boschetti, Global Head of M&A at Towers Perrin, said:

“Throughout the recent M&A boom people have been obsessed by volume, not value. Our research has always sought to examine what we believe to be more crucial to shareholders: has value been destroyed or created? And if so, how has it been created?

“We are all well aware of the many factors that have put a brake on M&A in the current cycle. All evidence points to 2007 being the peak year of the current wave. But what our research says is that, if you have the means, now is the time to do that deal. The evidence from previous post-peak years in the M&A show that even when previous cycles destroyed value in the boom times, the post-peak period was one of value creation.”

The study collaboration started in 2005 to provide a quantitative analysis of worldwide M&A deal success. The first phase of the study compared the first full year of the current merger wave (2004) against prior merger cycles using public data from a number of sources. It was the first study to provide extensive evidence that unlike prior merger cycles, M&A deals in this wave – on average – generated shareholder value and improved financial performance for the newly combined companies.

The studies have examined shareholder value after six and eighteen months following deals closing. Therefore the most up-to-date research as yet is based on 2006 figures. According to this, deals done in that year on average outperformed the market by 9.1%.

Numerous studies of the M&A cycles that peaked in 1989 and 1999 have shown that M&A transactions when judged over time have destroyed value.

Professor Scott Moeller said:

In this climate, more than ever, deals will be scrutinised to see if they deliver value. Our previous findings have shown that the current merger wave has consistently reversed the historical trend and has been good for value creation. In previous waves, on average, value had been destroyed. But even then, the post-peak years have shown that sense came to play as the market cooled and value was created by companies not caught up in the froth of the market. So our analysis should provide positive grounds for confidence for corporations who have the ability to do deals today and for their shareholders. Based on our analysis, there is significant potential upside to doing a deal in 2008, a post-peak year, even though it may be even more necessary than ever to select deals carefully.”

In all nine years covered by the study, the total universe of deals analysed were 38,122 deals. Various screens were then applied to be able to carry out like-for-like comparisons. All acquiring companies were publicly quoted and the deals had to be for full ownership of the target asset. The study excluded acquisitions by subsidiaries and joint ventures.

Marco Boschetti added:

“Our study was the first to identify the significant change in deal success when compared to previous cycles. We believe that lessons have been learnt from past deals and improvements have stemmed from better discipline and governance demanded by shareholders. Greater attention has also been paid to deal execution and working through the people issues which were often previously overlooked.”

The next phase of the Towers Perrin / Cass Business School global M&A cycle study will be completed in the summer of 2008 when the results from 2007, the peak of the current cycle, will be available.

Dimitra Koutsantoni | alfa
Further information:
http://www.cass.city.ac.uk/media/stories/story_4_18491_117579.html
http://www.cass.city.ac.uk

More articles from Business and Finance:

nachricht Europe's microtechnology industry is attuned to growth
10.03.2017 | IVAM Fachverband für Mikrotechnik

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Giant Magnetic Fields in the Universe

Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.

The results will be published on March 22 in the journal „Astronomy & Astrophysics“.

Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...

Im Focus: Tracing down linear ubiquitination

Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.

Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...

Im Focus: Perovskite edges can be tuned for optoelectronic performance

Layered 2D material improves efficiency for solar cells and LEDs

In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...

Im Focus: Polymer-coated silicon nanosheets as alternative to graphene: A perfect team for nanoelectronics

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.

Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...

Im Focus: Researchers Imitate Molecular Crowding in Cells

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.

Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

International Land Use Symposium ILUS 2017: Call for Abstracts and Registration open

20.03.2017 | Event News

CONNECT 2017: International congress on connective tissue

14.03.2017 | Event News

ICTM Conference: Turbine Construction between Big Data and Additive Manufacturing

07.03.2017 | Event News

 
Latest News

Argon is not the 'dope' for metallic hydrogen

24.03.2017 | Materials Sciences

Astronomers find unexpected, dust-obscured star formation in distant galaxy

24.03.2017 | Physics and Astronomy

Gravitational wave kicks monster black hole out of galactic core

24.03.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>