A new era for Mergers and Acquisitions
15 November 2016
The fact that M&As tend to destroy value for shareholders of acquiring companies more often than they create is perhaps among the most well documented and puzzling facts in corporate finance market and academic research.
New ICMA Centre research reveals that value creation from M&As may have reached a pivotal milestone and the high likelihood of large deals ending up in disaster is no longer the status quo. The study by Dr George Alexandridis and Nikolaos Antypas, co-authored with Prof Nickolaos Travlos from the University of Surrey, and titled Smart Mega Merger Deals: Value Creation on a Massive Scale, is the first to examine the characteristics and performance of M&As carried out in the post-financial crisis era, when a new wave of deals emerged in 2010, reaching a peak in 2015.
The study marks a milestone in existing knowledge on acquisition gains and challenges conventional wisdom that firms destroy shareholder value more often than they create when carrying out sizable acquisition investments. Its findings also imply that a financial crisis of grand scale and its shockwaves can ultimately contribute towards more effective monitoring of corporate investment selection decisions as well as the M&A implementation and integration processes, yielding sizeable benefits for investors.