Future of Work Decision-Making & Analytics
USING BEHAVIOURAL SCIENCE EFFECTIVELY
creation of value is more assured. However, this needs a sufficiently broad strategy to identify plenty of targets. If the price or risk of a particular target seems unacceptable, simply move on to the next target. This is a tactic that private equity and many more successful corporates pursue. With large targets, there are few options, and so major risks and high prices tend to be swallowed, with potentially disastrous consequences. While corporates have a mixed record with M&A, private equity has been successful with its buy, improve, and sell model for several decades. These groups are attracting such enormous amounts of investor cash that Western stock markets have been losing businesses for 20 years or more. Private equity now accounts for 35 to 40 per cent of all corporate transactions globally – and that figure continues to increase because it delivers consistently high returns. It does so by following the four rules before completing an acquisition. And once the deal is complete, it creates value through governance, incentives, discipline, growth, and rapid change. In my new book, The Unwritten Rules of M&A , I establish a series of guidelines to reduce risk and improve outcomes in M&A based on my research and my own extensive experience. They are indispensable for anyone who is likely to be involved in integration, due diligence, strategy, or any other activity connected to M&A. Following them will help to ensure the costly mistakes made by JET and others are not on the menu.
FOR RICHER, FOR SURER
How CEOs are influenced by their spouse
by Constantinos Antoniou
little value unless it yields economies of scale or scope, or increased market power. In the case of Grubhub and the takeaway delivery industry, such benefits seem unlikely as the US is such a separate market to Europe. Instead, being the biggest is about ego and legacy. Neither of these create value for shareholders. Unless there are clear benefits from a strategy, ask why it is being pursued. JET’s failure to do this led to a needless destruction of value. 4 Size matters We know most large acquisitions fail, however exciting and
transformational they may seem. High acquisition prices, culture clashes, and the scale of integration required often result in a disappointing outcome. Businesses may find themselves wrestling with the problems and extent of debt for many years afterwards. As a result, deals worth 30 per cent or more of the acquirer’s value have a strong likelihood of destroying value. These large deals are often the result of limited strategic choices. Evidence suggests that a strategy of acquiring smaller businesses is far more effective in creating value. Prices are lower, integration is easier, and the
Learn more about Mergers and Acquisitions: How to Maximise Success at WBS at The Shard.
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