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Mergers & Acquisitions
Report

Mergers & Acquisitions

The Good, the Bad, and the Ugly (and How to Tell them Apart)

Richard Tortoriello, Temi Oyeniyi, David Pope, Paul Fruin and Ruben Falk
Standard & Poor's, 2016
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Editorial Rating

8

Qualities

  • Analytical
  • Innovative
  • Overview

Recommendation

Mergers and acquisitions continue to make headlines in the United States. Stakeholders in both the acquiring and the acquired firms anticipate robust returns from these deals. Indeed, the acquired companies capture considerable stock price premiums when the transactions close. However, in this incisive analysis, S&P Global Market Intelligence associates Richard Tortoriello, Temi Oyeniyi, David Pope, Paul Fruin and Ruben Falk find that most acquiring firms tend to underperform significantly in their industries over the first three postmerger years. getAbstract recommends this highly technical, yet insightful, report to investors interested in understanding the dynamics of M&A on shareholder returns.

Take-Aways

  • Postmerger data from companies in the Russell 3000 Index show that just an estimated 40% of mergers and acquisitions achieved their goals within three years.
  • Declines in postacquisition fundamentals are primarily responsible for these disappointing results.
  • Acquiring entities experience falling net profit and operating margins, leading to reductions in earnings per share growth.

About the Authors

Richard Tortoriello et al. are professionals at Quantamental Research, a unit of S&P Global Market Intelligence.

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