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Summary
- M&A deals have a 70-75% failure rate, double that of internal projects, with rising acquisition premiums and goodwill write-offs exacerbating the trend.
- Lev and Gu identify 43 factors influencing M&A success, offering a practical 10-factor model for investors to assess prospective mergers.
- Overconfident CEOs, flawed incentives, and commission-driven bankers contribute to high M&A failure rates, with conglomerate acquisitions offering no real shareholder benefit.
- The book underscores the importance of internal investment over acquisitions, highlighting integration challenges and accounting issues like subjective goodwill estimates.
At an early-1980s presentation by a leading investment bank to a business school alumni group, the bank’s CEO was confronted during the Q&A session about the high failure rate of corporate mergers and acquisitions (M&A), from which Wall Street derives a
CFA Institute is a global community of more than 100,000 investment professionals working to build an investment industry where investors’ interests come first, financial markets function at their best, and economies grow.
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