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Deals from Hell by Arthur Levitt Jr., Robert F. Bruner

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2
Where M&A Pays and Where It Strays: A Survey of Research
How you assess an M&A deal or the whole flow of M&A activity depends on your frame of reference, on beliefs that help you decide whether specific deals represent the average, or what statisticians call the “tails of the distribution.” This frame of reference is a hugely important filter for decision makers and their advisers and is typically built on a blend of personal experience, anecdotes, conventional wisdom, and facts. The aim of this chapter is to enrich your frame of reference about success and failure in M&A with the findings of scientific research.1
I have two basic criticisms of the way most people think about M&A. First, the conventional wisdom is poorly grounded in the scientific evidence on the subject. The fashionable view seems to be that M&A is a loser’s game.Yet an objective reading of more than 130 studies supports the conclusion that M&A does pay.2 These studies show that the shareholders of the selling firms earn large returns from M&A, that the shareholders of the buyers and sellers combined earn significant positive returns, and that the shareholders of buyers generally earn about the required rate of return on investment.
Second, conventional wisdom seems to hold that failure is the average outcome of all classes and varieties of M&A, and that, in this sense, M&A, is regrettably homogeneous. Yet the research reveals wide dispersion of returns both within and across studies. And such variation suggests ...

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