How to Create Value
New Perspectives on the Modern Corporation series
Chapter 10: Conclusions: how to make M & As create value
According to a considerable amount of empirical research, management’s personal interests, inaccurate evaluation of synergies and ineffective implementation result in generating an M & A failure rate of more than 50%. In the light of the poor performance of M & As, as empirical research showed, we have drawn up some managerial directives to make M & As successful. First of all, it is necessary that M & As be undertaken on correct and clear theoretical fundamentals. Certainly, M & A remains a very complex and difficult decision with high risk of failure, but it has not to be taken on generic expected strategic advantages and on supposed benefits of growth. It requires being driven by the objective of creating value for shareholders and it must be based on a deep analysis of the economic effects and cash flows produced over the long period. While it is not possible to cancel the risk of the investment, we think it is possible to reduce the risk of failure by carefully considering all the effects an M & A can produce on the shareholder value.
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