Mergers and acquisitions (M&A) among public companies are often touted as a strategic lever for growth, but a recent report from KPMG suggests that more often than not, these deals end up destroying shareholder value.
The report, which analyzed over 3,000 public-to-public M&A deals exceeding $100 million from 2012 to 2022, found that a staggering 57.2% of acquiring companies ultimately saw their shareholder value diminish. While many deals initially posted positive total shareholder return (TSR) – an average of 13.2% above their sector index in the lead-up to closing – this gain frequently evaporated, with TSR dropping an average of 7.4% in the two years following the deal’s completion.
According to KPMG, the primary culprits behind this value destruction are twofold: acquirers tend to overestimate the benefits of a deal, leading to overpayment, and they struggle to effectively operationalize projected gains. The complexities of integration and execution are often underestimated, leading to a failure to realize anticipated synergies.
However, the report isn’t entirely pessimistic. Approximately 42.8% of deals successfully unlocked meaningful synergies, demonstrating that M&A can indeed be a powerful engine for sustained growth when executed with strategic discipline. For these successful acquirers, M&A drove long-term value creation.
KPMG emphasizes the need for greater accountability in the M&A process. The report calls on capital allocators to demand clear, quantified evidence of value creation *before* a deal is struck and to rigorously track and communicate the realized benefits *after* the transaction closes.
Looking ahead, the report also touches on potential M&A trends influenced by the current macro environment of deglobalization and rapid technological acceleration. These could include geographical carve-outs and strategic deals that bridge new and old economic models.
Ultimately, KPMG aims to equip leaders with actionable frameworks, blending their transaction support experience with data-driven insights. The goal is to guide M&A decisions from the initial strategy through to post-deal value realization, ensuring that these complex transactions are aligned with the overarching objective of long-term value creation.
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