If you listen to Wall Street, you would think that mergers, acquisitions, divestitures, and other corporate realignments are the pathway to success.
For CEOs, who usually cash out big time in these deals—and all the M&A specialists involved, including lawyers, investment bankers and various consultants—corporate deal-making is the road to riches. But as many academic studies have shown over the years, most mergers and acquisitions don’t work, don’t create much in the way of synergy and don’t increase shareholder value. In fact, in the long run, most post-merger companies are worse off than they were before.
But who cares when it’s so exciting, and when the transactions themselves (not the businesses that remain), are so immensely profitable?