COMPANIES significantly underperform the market during periods when they announce no M&A activity – either acquisitions or divestments – and even more significantly underperform companies active in announcing M&As.
That is the conclusion of a report published yesterday by Intralinks, a global provider of enterprise collaboration solutions, in partnership with City University London’s Cass Business School.
The study had a number of core findings: companies outperform the market the more frequently they acquire; a limited amount of divestment activity by companies leads to market outperformance; and companies deliver superior total shareholder returns with a balanced strategic M&A portfolio management programme, which includes at least one acquisition per year while simultaneously conducting one or two divestments every three years.
The results fly in the face of previous research, which typically showed strong positive returns for targets and negative returns for acquirers
The study examined the M&A activity of 25,000 global companies over a 20-year timeframe.