Growth through acquisitions has no guarantee for success. Results seem to fluctuate from ‘best thing we ever did’ to complete failure. Despite this risk, M&A transactions remain a key growth strategy for many corporations, especially large and global ones.
In the article Lessons from Successful Serial Acquirers – Unlocking Acquisitive Growth, BCG’s Gerry Hansell, Decker Walker, and Jens Kengelbach take a closer look at what they call successful serial acquirers. According to their definition, these are firms that do many acquisitions (on average, spending more than 5 percent of their entity value per year), grow faster than their rivals (as much as three times as fast), and deliver attractive shareholder returns (nearly double the returns of their peers over a sustained 15-year period).
The authors interviewed senior managers and other experts of these successful senior acquirers to find out what they do differently. There are some common reasons why they can avoid the typical fluctuations in M&A success and, instead, produce constantly high results.
The authors summarize their findings as follows: But the single factor that most often distinguishes these successful serial acquirers from the rest is their willingness to invest large amounts of leadership time, money, and organizational focus in support of their M&A strategy—in advance of any particular deal.
They attribute serial M&A success to three key areas:
- A compelling investment thesis
- An enduring M&A network and culture
- Distinctive principles for the M&A process
The article explains these success factors in more detail.
My takeaway from this analysis is that successful serial acquirers make M&A activities part of their day-to-day business. This mindset distinguishes them from other frequent investors that consider each transaction a one-off project. Once a company achieves this level, M&A success seems to be a self-reinforcing effect. These corporations move along the experience curve as they improve their processes, capabilities and tacit knowledge with every new transaction.