This book delves into the complexities of mergers and acquisitions, analyzing why most deals fail and how a select few succeed. The authors use a large dataset of 40,000 acquisitions to identify key factors influencing success or failure. They highlight the role of CEO overconfidence, flawed incentives, and inadequate due diligence. The book offers a practical scorecard to assess the likelihood of success before a deal is finalized. Ultimately, it advocates for a more cautious and data-driven approach to M&A.
In The M&A Failure Trap: Why Most Mergers and Acquisitions Fail and How the Few Succeed, Baruch Lev and Feng Gu provide a wealth of evidence on the success and failure factors of acquisitions.
Lev, professor emeritus of Accounting and Finance at NYU’s Stern School of Business and Gu, professor of Accounting and Law at the State University of New York, have analyzed more than 40,000 acquisitions over the past four decades. This has not only allowed them to understand the reasons why 75% of deals fail but also to develop a scorecard that can help decision-makers assess the likelihood of acquisition success ex ante.
In their conversation with Martin Reeves, chairman of the BCG Henderson Institute, Lev and Gu discuss how to measure acquisition success, how to curb overconfidence on the side of the acquirer, and key lessons for CEOs seeking inorganic growth.
Key topics discussed:
[02:45] How mergers and acquisitions have changed
[05:00] Judging the success or failure of acquisitions
[08:16] Drivers of acquisition failure
[14:41] Patterns of successful acquisitions
[17:27] Overconfidence and its causes
[19:51] Managerial implications
Thinkers & Ideas