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M&A during turbulent economic times: lessons from the last recession

Investing in mergers and acquisitions (M&A) during an economic downturn or in times of economic turbulence may seem counterintuitive. The instinct is to halt deal activity or acquisitions, cut spending and preserve cash.

However, doing the opposite in tough times in the pursuit of profitable long-term growth can help CFOs and corporate treasury find good-value acquisitions and help organizations to pull ahead when the economic recovery commences.

Bain & Company’s 5th annual Global M&A Report 2023, published on January 31, 2023, reveals that savvy corporate executives looking ahead to M&A this year remain confident about dealmaking’s ability for value creation. While the M&A deal market in 2022 witnessed a 32% decline from a record high in 2021, Bain’s report confirms that dealmaker sentiment is optimistic and continues to remain central to corporate strategy for growth and profitability.

To understand the nature of M&A activity and its decision-making process, Bain conducted a survey of nearly 300 M&A practitioners. The survey ran in October 2022 in the US, Canada, Brazil, the UK, Germany, France, Greece, Italy, Switzerland, Japan, India and Australia. The report explains why savvy corporate executives will turn crisis into an opportunity by accelerating M&A activity in 2023, and why the opportunity cost is huge for companies that stay on the sidelines.

To support its argument, Bain looked back at the global financial crisis of 2007–2009 and beyond and analysed M&A activity of thousands of companies during that period to highlight the lessons that can be “Learned from different M&A behaviour during times of turbulence.”

Stay in the M&A game and learn how to play it well through tough times

Bain assessed the returns to shareholders for the M&A activities deployed by nearly 2,900 publicly traded companies worldwide for the period between 2007 and 2017. “In 2007, worldwide deals surpassed 40,000 for the first time; their cumulative value hit $4.6 trillion, 40% above the dotcom peak in 2000. It seemed like the M&A party might never stop. But when the global financial crisis brought the boom to an abrupt end and most economies went into recession sometime during 2008–2009, the hangover set in. Many business leaders grew leery of any kind of dealmaking—deal volume dropped by 14% from 2007 to 2009”, stated the report.

Companies that were engaged in dealmaking activity or acquisitions during the last economic contraction period, the data in the report shows, “consistently outperformed those that stayed away from deals.” In fact, “Companies that acquired during the last economic downturn achieved an average annual total shareholder return (TSR) of 5.9% compared with 4.7% for those that did not”, the report noted.

The report adds that the most important objective of M&A is not just being an active acquirer, but assisting with successful strategy execution – “Be it strengthening the core business and increasing scale or creating strategic options via a scope deal.”

“Several industry-defining deals were made throughout the last economic recession”, even as certain companies, regardless of the downturn, leveraged their resources to expand their strategic options through the M&A route.

For example, “Pfizer’s agreement to acquire Wyeth for $68.4 billion in early 2009 bought some time for Pfizer as patents were about to expire on several of its leading medicines, and it gave Pfizer an opportunity to diversify its pharmaceuticals portfolio and expand its pipeline (with a particular focus on biopharmaceuticals and vaccines)”, the report explained.

Besides creating strategic options, allocating resources for acquisitions in times of recession is a sound approach because it presents corporations with a tremendous opportunity to make bold moves to come out ahead of their competitors, as well as acquire assets that are “cheaper” than they have been in years.  

Frequency and materiality differentiate M&A performance

The report further mentions that “Similar to most things in life, you get better at what you do when you do it repeatedly. Companies that acquire frequently, ‘serial bolt-ons’ (see figure below), tend to outperform the average company on TSR (6.7% annual).”

                     Companies that do M&A frequently and at scale outperform

The core research underlying Bain’s belief in “The concept of repeatable M&A (replicated multiple times over the past 20 years) shows that frequency (how many deals you do) and materiality (how much of it you do) define a lot of what differentiates M&A performance.”

About one deal per year is good enough to qualify as a frequent acquirer. However, “To be a material acquirer does require heft: 75% or more of your market cap from acquired companies over a decade”, as per Bain’s analysis.

Organizations that are both frequent and material acquirers over a decade are addressed by Bain as mountain climbers (see figure above – in red, top right) and create the “Greatest TSR.”

On the contrary, “Companies that are infrequent acquirers but that undertake large deals relative to their market capitalization—we refer to such companies as selective large bets.”

“Among all companies studied, selective large bets are the worst performers over time as their limited acquisition experience, combined with investment in a large deal, usually results in poor deal outcomes”, cautions the report, mentioning that selective large bets “Generated only 3.7% in annual TSR from 2007 to 2017.”

Organizations that were invested in consistent M&A activity over economic cycles contributed to higher TSR than competitors sitting on the sidelines. “This finding holds up year after year, across industries”, according to the Bain study.  

It may be pertinent to bear in mind that “Deal success and deal failure is more a matter of cumulative experience and capability in making a deal and less a function of standalone deal circumstances”, according to Bain.

While studying M&A behaviour in times of economic slump, the Bain study also outlines the returns of active and inactive acquirers with reference to their prerecession and recession-era M&A activity.

“Those companies that were active acquirers before the recession performed best by staying active—their average annual TSR was 6.1% compared with 3.8% for those that decided to move to the sidelines (see figure below – in red, left).”

Active acquirers outperformed bystanders during the last economic downturn

Those organizations that were inactive in dealmaking before the recession but changed their M&A behaviour to become active acquirers during the last recession witnessed an “Annual TSR of 5.5% compared with 5.0%” for those that remained as bystanders (see figure above – in red, right).


Given the fall in dealmaking in 2022 and the fragility of the global economy, the natural impulse may be for organizations to adopt a wait-and-see approach before pursuing big-ticket acquisitions. But for corporations that want to thrive and make more bets on profitable long-term growth rather than short-term results, it may be an opportune time to not sit on the sidelines, but to acquire companies to outpace the competition.

Experience and history show that economic contractions are opportunities for corporate acquirers to make the bold moves and invest in acquisitions that pay off as economic activity rebounds. Bain’s research corroborates this fact: “Our long-term research proves that proactive dealmakers are more likely to emerge from downturns as winners.”

But for that to happen, M&A practitioners, CFOs and corporate treasurers ought to consider Bain’s dealmaking recommendation, particularly during turbulent times – “The winners will be those that stay in the game—and learn how to play it well.”

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