[OPE] Mergers & Acquisitions

From: Jurriaan Bendien <adsl675281@telfort.nl>
Date: Mon Aug 03 2009 - 13:04:26 EDT

(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%

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

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%.


The Towers Perrin/Cass Business School study
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

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