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 Mathematical confirmation: Rewiring financial networks reduces systemic risk
22.06.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht Frugal Innovations: when less is more
19.04.2017 | Fraunhofer-Institut für Arbeitswirtschaft und Organisation IAO

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: Fizzy soda water could be key to clean manufacture of flat wonder material: Graphene

Whether you call it effervescent, fizzy, or sparkling, carbonated water is making a comeback as a beverage. Aside from quenching thirst, researchers at the University of Illinois at Urbana-Champaign have discovered a new use for these "bubbly" concoctions that will have major impact on the manufacturer of the world's thinnest, flattest, and one most useful materials -- graphene.

As graphene's popularity grows as an advanced "wonder" material, the speed and quality at which it can be manufactured will be paramount. With that in mind,...

Im Focus: Exotic quantum states made from light: Physicists create optical “wells” for a super-photon

Physicists at the University of Bonn have managed to create optical hollows and more complex patterns into which the light of a Bose-Einstein condensate flows. The creation of such highly low-loss structures for light is a prerequisite for complex light circuits, such as for quantum information processing for a new generation of computers. The researchers are now presenting their results in the journal Nature Photonics.

Light particles (photons) occur as tiny, indivisible portions. Many thousands of these light portions can be merged to form a single super-photon if they are...

Im Focus: Circular RNA linked to brain function

For the first time, scientists have shown that circular RNA is linked to brain function. When a RNA molecule called Cdr1as was deleted from the genome of mice, the animals had problems filtering out unnecessary information – like patients suffering from neuropsychiatric disorders.

While hundreds of circular RNAs (circRNAs) are abundant in mammalian brains, one big question has remained unanswered: What are they actually good for? In the...

Im Focus: RAVAN CubeSat measures Earth's outgoing energy

An experimental small satellite has successfully collected and delivered data on a key measurement for predicting changes in Earth's climate.

The Radiometer Assessment using Vertically Aligned Nanotubes (RAVAN) CubeSat was launched into low-Earth orbit on Nov. 11, 2016, in order to test new...

Im Focus: Scientists shine new light on the “other high temperature superconductor”

A study led by scientists of the Max Planck Institute for the Structure and Dynamics of Matter (MPSD) at the Center for Free-Electron Laser Science in Hamburg presents evidence of the coexistence of superconductivity and “charge-density-waves” in compounds of the poorly-studied family of bismuthates. This observation opens up new perspectives for a deeper understanding of the phenomenon of high-temperature superconductivity, a topic which is at the core of condensed matter research since more than 30 years. The paper by Nicoletti et al has been published in the PNAS.

Since the beginning of the 20th century, superconductivity had been observed in some metals at temperatures only a few degrees above the absolute zero (minus...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Call for Papers – ICNFT 2018, 5th International Conference on New Forming Technology

16.08.2017 | Event News

Sustainability is the business model of tomorrow

04.08.2017 | Event News

Clash of Realities 2017: Registration now open. International Conference at TH Köln

26.07.2017 | Event News

 
Latest News

On the way to developing a new active ingredient against chronic infections

21.08.2017 | Life Sciences

Smart Computers

21.08.2017 | Information Technology

A Map of the Cell’s Power Station

18.08.2017 | Life Sciences

VideoLinks
B2B-VideoLinks
More VideoLinks >>>