MIT Sloan Management Review on Why Some CFOs Make Better M&A Deals

Despite the tremendous uncertainty and disruption caused by the persistent COVID-19 pandemic, global M&A volume exceeded $5 trillion for the first time in 2021, with many experts predicting that this current wave is only the beginning of a merger frenzy that could last for several years.1 The abundance of capital and the ever-increasing pressures to grow more quickly, become larger, and digitalize are driving companies to close deals with over-the-top premiums.

Overpriced acquisitions are hardly a new phenomenon: In the past two decades, U.S. public companies have paid, on average, a 36% premium in excess of the prevailing market value of the target company prior to the news of the takeover. But in the current hot market for acquisitions, the risk of overpayment is significantly heightened — and, according to our research, that’s a risk organizations might be able to mitigate by examining and changing power dynamics in the C-suite.

About the Author

Ayse Karaevli (@aysekaraevli) is a Chaired Professor of Corporate Management and Change at WHU–Otto Beisheim School of Management. Serden Özcan holds the Otto Beisheim Endowed Chair of Innovation and Corporate Transformation at WHU–Otto Beisheim School of Management.

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