What Do You Read?

David Harding and his colleagues at Bain & Co. have an interesting take on strategic m&a. After considerable research, they conclude that companies that acquire with some frequency and that leverage know-how from one deal to execute a subsequent transaction outperform peers by most metrics (Mergers & Acquisitions, December 2004). This follows years of unending surveys declaring, based on acquirer stock prices, that one out of every three deals is an outright fizzle (i.e., destroys value) while another third falls short of expectations (i.e., doesn’t add value). So what paper do you read? Both. While companies reap rewards by honing acquisition skills until they become competencies, lots of other less meticulous buyers don’t fare as well. The contrast became quite stark to me as I was preparing the cover story for this issue. Harding and other authorities pointed out that acquirers today are shooting for such basic goals as growth and cost controls, and going about the process quite systematically. Now, that notion wasn’t in a couple of years ago at the crescendo of the corporate scandals. Some commentators enjoyed dumping on m&a as a root cause, with one respected educator writing that the frequent acquirers had a gunslinger mentality that made it easy to fudge the numbers. That kind of thinking, in fact, may have helped slow deal flow, as skittish firms put off acquisitions until they had worked out all the new Sarbanes-Oxley requirements. A broad spectrum of buyers is back now and they’re not in a frame of mind to snap up anything in sight at any price. The challenges they face are pretty stiff and they have determined that a few good deals can give them a fighting chance. Sounds pretty down to earth to me. Martin Sikora Editor Copyright 2005 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com