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 Microtechnology industry is hiring – positive developments of past years continue
09.04.2018 | IVAM Fachverband für Mikrotechnik

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

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: Regensburg physicists watch electron transfer in a single molecule

For the first time, an international team of scientists based in Regensburg, Germany, has recorded the orbitals of single molecules in different charge states in a novel type of microscopy. The research findings are published under the title “Mapping orbital changes upon electron transfer with tunneling microscopy on insulators” in the prestigious journal “Nature”.

The building blocks of matter surrounding us are atoms and molecules. The properties of that matter, however, are often not set by these building blocks...

Im Focus: University of Konstanz gains new insights into the recent development of the human immune system

Scientists at the University of Konstanz identify fierce competition between the human immune system and bacterial pathogens

Cell biologists from the University of Konstanz shed light on a recent evolutionary process in the human immune system and publish their findings in the...

Im Focus: Transformation through Light

Laser physicists have taken snapshots of carbon molecules C₆₀ showing how they transform in intense infrared light

When carbon molecules C₆₀ are exposed to an intense infrared light, they change their ball-like structure to a more elongated version. This has now been...

Im Focus: Famous “sandpile model” shown to move like a traveling sand dune

Researchers at IST Austria find new property of important physical model. Results published in PNAS

The so-called Abelian sandpile model has been studied by scientists for more than 30 years to better understand a physical phenomenon called self-organized...

Im Focus: Cryo-force spectroscopy reveals the mechanical properties of DNA components

Physicists from the University of Basel have developed a new method to examine the elasticity and binding properties of DNA molecules on a surface at extremely low temperatures. With a combination of cryo-force spectroscopy and computer simulations, they were able to show that DNA molecules behave like a chain of small coil springs. The researchers reported their findings in Nature Communications.

DNA is not only a popular research topic because it contains the blueprint for life – it can also be used to produce tiny components for technical applications.

All Focus news of the innovation-report >>>

Anzeige

Anzeige

VideoLinks
Industry & Economy
Event News

Global Legal Hackathon at HAW Hamburg

11.02.2019 | Event News

The world of quantum chemistry meets in Heidelberg

30.01.2019 | Event News

Our digital society in 2040

16.01.2019 | Event News

 
Latest News

The Internet of Things: TU Graz researchers increase the dependability of smart systems

18.02.2019 | Interdisciplinary Research

Laser Processes for Multi-Functional Composites

18.02.2019 | Process Engineering

Scientists Create New Map of Brain’s Immune System

18.02.2019 | Studies and Analyses

VideoLinks
Science & Research
Overview of more VideoLinks >>>