Those snappy thinkers at McKinsey wrapped up 2015 with a nice piece entitled “M&A 2015: New Highs, and a New Tone.” There are some interesting observations that warrant highlighting.
First, let’s give credit. The full McKinsey & Co. article can be found by clicking here.
Examining share price data in the days surrounding the initial announcement of deals, McKinsey found that investors in 2015 continued to be neutral on large deals (as regards the buyer’s shares), which is a step up from years past when they were decidedly negative.
But The Merger Verger wants to know why and we’re given two very promising explanations:
- Companies are being smarter about large deals, more and more looking at them from the angle of revenue growth than cost reduction. It
always requires an investment to reduce costs but investors appear to be saying that paying multiples over market to get those reductions perhaps isn’t the best approach.
- Not only are companies smarter about why to do deals but they are getting smarter about how to do them as well, as this quote from the article states quite succinctly:
“Companies may also be getting better at integration and capturing deal synergies. In our observation, the discipline, professionalism, and capabilities around integration have certainly improved.”
This warms the cockles of, you know, The Merger Verger’s heart and … under the theory of better late than never we offer the following illustration to support this post.
(Rumor has it that the foregoing is Dutch wisdom… more advanced thinking from the folks that brought us the nutmeg, tulip manias, legal dope and the Kröller-Müller Museum.)