Re: [OPE] Mergers & Acquisitions

So healthier companies are likely to make acquistions.

On Mon, Aug 03, 2009 at 07:04:26PM +0200, Jurriaan Bendien wrote:
> (A clip from Boards & Directors, Volume 6, Number 8, August 2009. Just as
> I suggested a year ago,
> http://ricardo.ecn.wfu.edu/~cottrell/OPE/archive/0806/0138.html , it
> looks like the health sector is relatively the most profitable business
> in the recession - JB).
>
> Companies Completing Deals After Lehman Collapse Outperform Peers by 6.3%
> Globally
>
> Companies that completed mergers or acquisitions since the beginning of
> the downturn are outperforming their non-acquisitive peers by 6.3%
> globally, and 9.1% in North America, according to a recently completed
> financial study by Towers Perrin and the Cass Business School in London.
> Performance was even stronger when financial services companies were
> removed from the analysis, with the deal makers besting market indexes by
> 7.8% globally and 10.0% in North America. The study analyzed 204 deals
> globally (104 in North America) with a value greater than $100 million
> that were completed between September 15, 2008 (the day Lehman filed for
> bankruptcy) and May 31, 2009.
>
> The study shows that companies forging ahead with transactions despite
> the recessionary pressures of this period have picked up bargains and
> seen better returns than those not doing deals at all. While returns
> were negative all around, the declines were significantly less for the
> deal-making group, which produced, on average, a negative shareholder
> return of 25.5%, compared to a negative shareholder return of 31.8% for
> the rest of the market. [they do not say anything about the relative size
> of more successful companies, in terms of capital assets held).
>
> The study also shows that the more deals done by a company, the better
> its performance relative to the market overall. Repeat acquirers over
> that same period--of which there were 15 companies completing 32
> deals--outperformed the MSCI World Index by 8.1%. The 10 North
> America-based companies that undertook multiple deals in this time frame
> also outperformed both the market and peers that completed just one deal,
> besting the overall market by 13.3%.
>
> Other key findings emerging from the global study:
>
> Companies acquiring within their own country borders outperformed the
> market by 7.7%, whereas acquisitions across borders only outperformed by
> 4%. Deal makers in financial services performed only 0.4% better than the
> global market, yet outperformed their peer group by 14%. Health care was
> the best-performing industry, with a 13.8% better return. The technology
> sector outperformed by 9.3%, and energy by 7.3%.
>
> Methodology
>
> The Towers Perrin/Cass Business School study
> http://www.towersperrin.com/tp/showdctmdoc.jsp?url=Master_Brand_2/USA/Press_Releases/2009/20090706/2009_07_06.htm
> http://www.newswire.ca/en/releases/archive/July2009/06/c3813.html
> was based on data from the Thomson One Banker Mergers & Acquisitions
> database. The study included deals with a value greater than US$100
> million (204 in all) completed between September 15, 2008 and May 31,
> 2009. (Only mergers and acquisitions of companies or business divisions
> were included.) The performance analysis covers the period from six
> months prior to deal announcement through to the market close at the end
> of May 2009. This is the period used to assess share price and to
> compare to the MSCI World Index. The figures are the median of
> performance results among the deals.
>
> The acquirer had to own 100% of the target/asset following the deal. All
> adjustments were calculated using share price development less index
> development for the same period, and then averaged by using median. By
> industry, the only sectors with a statistically significant sample for
> individual examination were financial services, health care, technology
> and energy.
>
>
>
>
>
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-- 
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail michael at ecst.csuchico.edu
michaelperelman.wordpress.com
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