In the early 2000s, studies showed that 60% of M&As did not generate the expected returns. Surprisingly, 20 years later, companies that carried out recurring acquisitions delivered returns, on average, 130% higher than those that remained outside the market – this is what a recent article by Bain & Company reveals.
What did these companies do differently?
According to Bain & Company, four fundamental factors were systematically improved by the best buyers:
1. Scope Expansion:
Companies like Cisco, Comcast and Bank of America have expanded their capabilities and expanded geographically, shifting focus from defense and cost to growth and attack.
2. More Sophisticated Diligence: Cultural assessments and new techniques, such as web scraping and expert networks, have become essential to the success of mergers.
3. Frequency of Transactions:
Experience is crucial in M&A. Companies that make frequent acquisitions have more than twice the return of non-acquirers. Those making five or more annual acquisitions see an additional 20% increase in returns.
4. Frequency not Size:
Large one-time deals are risky and often fail. The best strategy has been to focus on frequent, smaller acquisitions.
Read the full Bain & Company article: https://lnkd.in/d7gzTGE7
