Increase Your Chance of Success in Transformative M&A

M&A and turnarounds are both increasingly important in today’s business environment. As long-term growth rates trend downward in many economies, business leaders are turning to acquisitions to fuel growth. At the same time, companies face a seemingly endless stream of disruptions from new technology, emerging competitors, shifts in consumer behavior, regulatory changes, and other threats, any of which can hurt performance and trigger a need for significant transformation of both strategy and operations.

M&A deals and turnarounds are difficult on their own, but many companies take on the considerable challenge of combining the two—trying to transform an underperforming target post acquisition. Turnaround M&As account for roughly half of all M&A deals, and that share is likely to increase should the economy experience a downturn—as was the case during the last recession, when turnarounds constituted nearly 60% of all M&A deals.

The BCG Henderson Institute and BCG TURN recently analyzed more than 1,000 turnaround M&As. We found that the stakes are extremely high: successful turnaround M&As achieve postdeal total shareholder return that is around 25 percentage points higher than that of the unsuccessful turnarounds. However, success is hard to achieve: only around 40% of turnaround M&As generate above-average shareholder returns.

Using advanced analytics, we identified a set of deal characteristics and managerial actions that significantly improve the odds of success—such as having a long-term orientation, choosing the right target, and initiating a turnaround program rapidly after the deal closes.

The BCG Henderson Institute is Boston Consulting Group’s strategy think tank, dedicated to exploring and developing valuable new insights from business, technology, and science by embracing the powerful technology of ideas. The Institute engages leaders in provocative discussion and experimentation to expand the boundaries of business theory and practice and to translate innovative ideas from within and beyond business. For more ideas and inspiration from the Institute, please visit our website and follow us on LinkedIn and X (formerly Twitter).