M&A: Carpe diem, says Towers Perrin

Quite how much the world changed after Lehman Brothers fell is still up for debate. Perhaps not as much as indicated by a new piece of research by Towers Perrin. This starts with a drawn-out parallel between the demise of Dick Fuld’s bank and the work of sixth-century monk Dionysius Exiguus, whose invention of the BC/AD system, Towers says, came to “define civilization”.

Still, once the long-dead monks are out of the way, the Towers Perrin / Cass research shows that for the select band of firms brave – and strong – enough to undertake M&A post-Lehman, the reward has been stock market out-performance. And it was even better for an elite band able to make more than one acquisition. As I wrote:

“Stock markets rewarded companies such as Johnson & Johnson (JNJ.N) and Cisco (CSCO.O) who were brave enough to make acquisitions in the months after Lehman Brothers’ collapse, a study released on Monday showed.

“Although firms who made purchases worth $100 million or more suffered an average 25.5 percent fall in their stock price, they outperformed the wider market by 6.3 percentage points, the Towers Perrin/Cass Business School research found.”

Read the full story here. Incidentally Towers and rival consultants Watson Wyatt have taken their own advice and are working on an all-stock merger. Wonder who they will tap for merger consulting?

M&A: lessons from history

Two chunky bits of M&A research landed this week (both, incidentally, drawing on Thomson Reuters data).

Cass Business School’s recently established M&A Research Centre sounded a note of a caution about the merits of buying floundering companies, even if such deals are initially welcomed by the market.

“Companies who bought distressed or insolvent rivals over the past quarter-century suffered lower returns on equity and underperformed buyers of healthy firms, a study released on Monday showed…