A study by the Boston Consulting Group found some holes in the common tales told about mergers and acquisitions.

A review of more than 4,000 deal completed between 1992 and 2006 revealed the following findings: 

– Despite conventional wisdom that cash-rich private equity firms have paid increasing premiums for their targets, the study found that on average, buyout shops pay lower multiples and lower acquisition premiums  than “strategic” buyers.  The reason? Private equity firms tend to target industries with less consolidation and reduced competition from strategic bidders.

– Higher acquisition premiums do not necessarily destroy value. The study found that deals that created value for shareholders had average premiums of 21.7 percent, while deals that failed to create — or even destroyed value — had average premiums of 18.7 percent.

– Bigger isn’t better. Deals worth more than $1 billion destroyed nearly twice as much value, on a percentage basis, as deals below $1 billion. The difference in size between the buyer and target also played a role, the study found. Deals in which the target was worth more than 50 percent of the value of the acquirer destroy twice as much value compared with deals in which the target was worth less than 10 percent of the buyer.  

– Mergers don’t always destroy value. Although 58.3 percent of deals between 1992 and 2006 destroyed value for the buyers, with a net loss of 1.2 percent for all transactions, the average deal created a net gain to shareholders of 1.8 percent when the returns of the target company was taken into account. Also, 56 percent of deals created value for the combined set of  shareholders. The sectors that were the best at creating value? Automotive and retail, the study found.

– Cash-only deals had a more positive influence on value than deals that relied on stock, a mix of stock and cash, or other payment contributions, the study found.