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How Companies Can Improve Value Through M&A

Beating the odds


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Board members and executives at Fortune 500 companies in the Consumer and Industrial Products (C&IP) industry generally accept the “rule of thumb” that 40 percent of Mergers & Acquisitions (M&A) transactions fail to provide the value anticipated.1 And why shouldn’t they? The figures are widely reported and legitimized by academic research, cited by industry peers, and reinforced by well-reputed consulting firms.

It is logical to assume – rule of thumb or no – that a portion of M&A transactions do add value. Pragmatism suggests that companies should not remain bystanders in the M&A game simply because accepted odds appear to favor inaction. In fact, when viewed against the odds of delivering value via other strategies, pursuing M&A may be a better bet. Therefore, an important question for executives and boards with fiduciary duties to shareholders may be: When should companies put money on the table and how should they “beat the odds” so an M&A transaction may pay off?

In response to recurring queries from clients, Deloitte undertook a research effort to help determine how to beat the odds and improve value through M&A. As part of its study, Deloitte analyzed the interplay among the four variables that were found to be statistically significant to the odds of addressing company’s requirements in M&A:

  • Acquiring at the correct time
  • Applying accumulated experience
  • Pursuing deals of an appropriate size relative to the acquirer
  • Funding transactions with equity or a mix of equity and cash

The study concludes with suggestions to address these recurring questions raised by Deloitte C&IP clients and their boards.

Read "Beating the Odds: How companies can improve value through M&A" for more information.

1Bruner, Robert F. Deals from Hell, John Wiley and Sons, 2005

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As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 

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