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The Success of Your M&A Deal Hinges on How You Announce It

 |  April 29, 2022

By: Mark L. Sirower & Jeff M. Weirens (Harvard Business Review)

One of the critical mistakes that acquirers make is the mismanagement of Announcement Day, which usually arrives in the form of a carefully staged conference call packed with journalists and analysts — and plenty of excitement. Then investors react to the acquirer’s presentation. For the majority of companies, those reactions come as a harsh surprise, with the acquirer’s stock dropping — investors feel the pain immediately.

To put it bluntly, you simply can’t mess up Announcement Day. If you stumble in clearly and effectively conveying the logic and economics of the deal on Announcement Day, you will give investors reasons to sell — and the value lost from the stock-price drop is likely to only get worse. If the presentation goes awry, what investors hear is that management doesn’t have a plan and they react accordingly.

What The Data Says

For our book The Synergy Solution, we studied 1,267 deals across three major M&A waves between 1995–2018 and looked at how investors reacted to each deal around Announcement Day, and how those deals performed over the year following the deal relative to their industry peers. Together, the deals constitute more than $5 trillion of equity value with over $1 trillion of acquisition premiums. The average market capitalization of sellers relative to their acquirer was 46% — very significant deals for acquirers…