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The Real Deal on M&A, Synergies, and Value

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The Real Deal on M&A, Synergies, and Value

Boston Consulting Group,

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Some predeal indicators can signal whether postdeal synergies in M&A will materialize.

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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Overview

Recommendation

Although the term “synergy” often describes the rationale behind mergers and acquisitions, the metrics that define it remain elusive. In this illuminating study, Boston Consulting Group professionals gathered evidence to investigate the relationships between acquirer behaviors and M&A outcomes 12 to 18 months after a transaction. Perhaps not surprisingly, the research found that success inevitably lies in management discipline. getAbstract recommends this instructive study to CEOs and others involved in the M&A decision-making process.

Summary

In 2016, researchers studied 286 M&A transactions conducted by public companies between 2010 and the end of 2015, in which an acquirer paid at least $500 million for a target, a sum representing more than 30% of the buyer’s market capitalization. The analysis sought to bring the idea of M&A synergy – “the source of the tangible expected improvement in earnings (calculated at an annual run rate) that occurs when two businesses merge” – into sharper focus and to define the metrics and data underlying this concept.

A useful tool for analyzing M&A success is “the P/E [price...

About the Authors

Decker Walker et al. are professionals with the Boston Consulting Group.

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