Long-term returns to M&A
Because we look at excess returns over a full decade, we’re better able to correlate longer-term strategies with shareholder returns and company survival rates. The data confirm that the larger companies get, the more they rely on M&A to grow: 75 percent of those that remained in the top 500 used active M&A programs, including 91 percent of those that stayed in the top 100 (Exhibit 2). A majority of these companies complete many smaller deals, with no large ones.2 This finding makes sense, since large deals tend to be hit or miss. A correlation of the identified patterns of M&A with long-term excess returns shows that the only companies that had, on average, negative excess returns were those that did large deals (Exhibit 3). The odds of positive excess returns were slightly better for shorter time frames after specific deals, with about half generating positive excess returns within two to five years of the deal.