A clearer-eyed view of M&A

The appeal of big deals is perennial: they can be transformative in strategic terms, add asset heft for future competitive battles, and for large companies may be one of the clearest paths to achieve material growth rates. But leaders hoping to use M&A to outperform their peers should also be aware of the value that a program of smaller, targeted deals can create. On average, in fact, this research suggests that more programmatic M&A is likely to generate stronger returns than the occasional big deal. The authors' analysis focused on the excess total returns to shareholders of the world's top 1,000 nonbanking companies, which completed more than 15,000 M&A deals over the past decade. Consequently, the authors found that companies across many sectors were successful with small-deal strategies. To be ready for such opportunities, companies need M&A capabilities that allow them to continually scan for sources of portfolio renewal, while effectively and routinely executing and integrating acquisitions.