Energy is diverted to internal matters and margins suffer. There is no value in a prolonged transition. Behind the glamour of this deal volume lies the unpleasant reality. Most of these companies have under-performed the expectations that drove the deal and justified the price. Disappointing operating results and returns that rarely exceed the cost of capital are common place.
Most acquisitions destroy, rather than create, shareholder value.
The result have been a divestiture rate of 30 percent or more and a legacy of defaults, bankruptcies, ruined careers and shareholder lawsuits. Privately, more investment bankers will admit that up to 75 percent of deals completed will be strategic, if not financial, failures. Less than 20 percent of the deals are likely to yield returns that exceed the cost of capital. Winning Winning at this game is all about execution. Deals seldom fail because they are strategically invalid.