As concerns about the onset of a global recession increase, M&A dealmakers should take heart: a recent study by Boston Consulting Group (BCG) in collaboration with Professor Sönke Sievers of Paderborn University finds that acquirers generally see higher returns from deals made in a weak economy. The findings are detailed in BCG’s 2019 M&A report, Downturns Are a Better Time for Deal Hunting.
The study found that, in the medium term, deals made in a weak economy create more value for buyers than those made in a strong economy. One year after an acquisition, buyers’ relative total shareholder return (RTSR) is nearly 7 percentage points higher for weak-economy deals than for strong-economy deals. After two years, the differential increases to more than 9 percentage points. (RTSR is a company’s total shareholder return compared with its sector index.)