KPMG on Performance of Mergers and Acquisitions

The value of annual global M&A transactions at the time of publication is estimated to be running at more than $2.2 trillion (Source: Thomson Financial Securities Data 1999). Confidence in mergers and acquisitions as a means to drive growth has never been higher.

This increasing confidence is not surprising. Most blue chip companies havebeen involved in several major mergers or acquisitions in recent years. One in two blue chip companies are involved in a major transaction every year. This experience has led many to believe in them as a fairly certain method of delivering business growth. Our survey respondents, all of whom had been heavily involved in a major M&A deal, were no exception to this positive outlook. The results show that one year after deal completion, as many as 82% were convinced that their transaction had been a success.

However, when we investigated further, it became clear that this positive assessment was based more on a subjective ‘hunch’ than on any objective and wide-ranging measure. In fact, despite the size of the deals, less than half (45%) had carried out a formal post-deal review.

A subjective assessment on the part of respondents was clearly not adequate in a survey designed to investigate the key drivers behind deal success. We also decided to measure the success of the respondents’ deals using an objective benchmark based on an increase (or decrease) in shareholder value. (The shareholder value measure we used is explained in more detail in the previous chapter on our approach.)

This objective measure gave a radically different picture. It shows that, in fact, 83% of mergers failed to unlock value.

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