Merged and acquired firms do better than competitors

FIRMS that carried out mergers and acquisitions last year outperformed the market by more than three percentage points, despite the commonly held view that buyouts often destroy value.

According to professional-services firm Towers Watson and City University London’s Cass Business School, acquirers outperformed the MSCI World Index by an average 3.2 per cent in 2009, a modest rise from the 2.7 per cent by which deal makers beat the index in 2008.

The strongest performance occurred within the health care and financial services sectors, which trounced the index by 11.8 per cent and 10.3 per cent respectively.

Marco Boschetti, head of international consulting at Towers Watson, said: “In previous cycles, M&A has been value-destructive and there is a perception that for many companies, that is still the case. However, our findings show that, despite some headline-grabbing failures, M&A deals do on the whole create value.”

Among the most successful deals last year was fund manager BlackRock’s takeover of UK rival Barclays Global Investors from Barclays, and US drug company Merck’s acquisition of rival Schering Plough. The survey added that domestic deals delivered better results then those conducted across borders, due to fewer complex integration challenges.