Growth From Mergers? Here’s What You Want to Hear

Everyone says that mergers and acquisitions mostly fail. Now Bain & Co. brings a challenge to the received wisdom. The “Big Three” consulting firm says companies engaging in regular M&A actually deliver better returns than those who resist the urge to merge.

But there’s a notable caveat that keeps the skeptical mantra alive — the bigger the deal, the more likely it will end in tears.

Bain’s research is manna for anyone who garners fees from transactions — bankers, lawyers, spin doctors, not to mention its own corps of management consultants. Companies doing occasional M&A outperformed those focused solely on organic growth in the decades ending 2010, 2020 and 2022, Bain found. Those that did one or more deals a year performed even better. The natural conclusion? Every company needs an M&A strategy and should keep at it throughout the economic cycle. That’s slide 1 of the pitchbook sorted.

The observation echoes similar findings by the Boston-based firm from 2004, when Bain looked at why dealmaking persisted despite mega-disasters like the AOL-Time Warner combination. But, more than $50 trillion of transactions later, the evidence in favor of doing regular, manageable M&A has become more pronounced. The outperformance of the frequent acquirers versus the non-acquirers was more than twice as good in 2012-2022 as 2000-2010.

There’s more. Bain’s surveys of executives two decades ago found that 60% of transactions failed to hit internal targets. Now, executives report that close to 70% of deals succeed.