Original source: SimoleonSense.com .
Interesting thoughts from Michael Mauboussin.
H/T Dah Hui Lau
Click Here to Read: Michael Mauboussin’s Latest Strategy Paper: An urge to merge
Introduction
Results show…acquirers moving early within an industry acquisition wave not only outperform those acquiring later, but on average achieve an economic gain. This result is particularly impressive because researchers have concluded that although target shareholders benefit from acquisitions, acquiring firms shareholders do not.
-Gerry McNamara, Jerayr Haleblian, and Bernadine Johnson Dykes The Performance Implications of Participating in an Acquisition Wave 1
Key Points
• An M&A wave may be on the way. If history is any guide, M&A activity tends to
follow the stock market with a modest lag.
• The early bird gets the worm. Academic research strongly suggests that companies
doing deals early in the M&A cycle provide better returns for their shareholders than
the companies that participate later.
• Use economic, not accounting, measures to evaluate deals. While it stands to reason
that executives seek to create shareholder value with the deals they do, the evidence
shows that most don’t. It appears that executives (and investment bankers) miss the
mark because they focus on accounting-based measures instead of considering the
extent to which synergies can exceed the premium.Click Here to Read: Michael Mauboussin’s Latest Strategy Paper: An urge to merge
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