David Harding is a director in the Boston Office and leader of Bain's Global M&A practice. Mr. Harding joined Bain & Company in 1983 and became a partner of the firm in 1989.
M&A viewpoint
Companies that create significant shareholder value through deals make a different set of choices:
- They make it a point to do lots of deals. In our study of all publicly traded companies from 1987-2006, we found that the more deals a company made, the more value it delivered to shareholders.
- They start doing small deals and then build the capability before doing ever larger, more complex deals.
- They do friendly deals. Our interviews with the CEOs of the deal winners pointed out how long and involved the courtship process can be. Many of the acquired companies were private, requiring the buyer to convince the seller of the merits of the move.
- They acquire core capabilities. Our research indicates that deals that involve a core capability transfer result in combined businesses that grew faster with higher margins, than simple scale combinations.
- The strategy is easy to understand. When a CEO has to explain why a deal makes sense, it usually doesn't. All companies have a fundamental basis of competition on which their success is rooted. Deals that strengthen that basis of competition make sense; those that open up a new competitive basis usually don't.
Read more on this topic at www.masteringthemerger.com.
