There is a rich and growing literature on mergers and acquisitions.
What started as a collection of rather dreary tomes on M&A and antitrust in the 1920s and 1930s has evolved into something far more diverse.
The release of James C. Freund’s “Anatomy of a Merger” in 1975 marked a turning point in which popular books began to be published, which were based on practitioner experience rather than just statistical evidence.
In the two decades which followed, hostile takeovers became the norm, leading to a whole new category of books.
The 1980s also brought the age of conglomerates and LBOs, a combination of which spawned “Barbarians at the Gate” by Bryan Burrough and John Helyar in 1989. And ith the number of global transactions on a seemingly constant upward trajectory, we can reasonably expect more in the near future.
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For now, here are 5 of the best books on M&A out there. Each one contributes something different of value to the conversation. And all are time well spent.
1. “Barbarians at the Gate: The Fall of RJR Nabisco,” Bryan Burrough and John Helyar
“Recognize that ultimate success comes from opportunistic, bold moves, which by definition, cannot be planned.”
As relevant today as it was a decade ago, Barbarians at the Gate is a cautionary tale of greed and infighting that underpinned an era-defining LBO in the 1980s. The books goes to considerable lengths to describe the intricacies of a massive deal, at times providing too many personal details about the protagonists, but giving insight into where the voices of dominant characters can drown out the voices of their more level-headed colleagues. Reads like a thriller. You’ll never look at Oreos in the same way after reading it.
Key Takeaway: When several players are involved in putting a deal together, it’s inevitable that the dominant personalities will tend to drown out the quieter, more level-headed protagonists. Understanding what’s worth hearing, and what’s little more than noise, is crucial to ensuring a transaction is a success.
Amazon link: Barbarians at the Gate: The Fall of RJR Nabisco
2. “Agile M&A: Proven Techniques to Close Deals Faster and Maximize Value,” Kison Patel
“At its core, Agile is a problem-solving mindset – a way of conceptualizing and responding to constantly changing environments – which values spontaneity, creativity, and swift reaction to novel situations over established procedure, itemization, and static workflow.”
DealRoom CEO Kison Patel spent years working on transactions before a brief project that allowed him to work closely with software developers made him rethink the whole M&A process. As the author himself states, ‘agile’ has become a misused buzzword, not unlike ‘synergy’ and ‘innovation.’ That’s not what the book is about. Patel outlines, in a step-by-step manner, the Agile M&A process and how it can generate value for M&A practitioners when put into pratice.
Key Takeaway: Despite a realization that M&A is failing thousands of businesses, the methodology for closing transactions has remained largely unchanged for the best part of a century. Slowly, the most successful deal closers are moving towards something that the author calls “agile M&A.”
3. “Valuation: Measuring and Managing the Value of Companies,” Tim Koller, Marc Goedhart, David Wessels
“Extremely large companies struggle to grow. Excluding the first year, companies entering the Fortune 50 grow at an average of only 1 percent (above inflation) over the following 15 years.”
Although not strictly a book on M&A, Valuation by a group of senior consultants at McKinsey, is essential reading for anyone involved in transactions. The authors go into some considerable detail about where value is generated and how managers don’t think critically enough about how businesses think about growth. The illustrative examples of ROIC and how goodwill affects the value generating capacity of M&A are particular highlights.
Key Takeaway: Truly understanding your company’s ROIC, as opposed to looking at growth as a standalone measure, is the key to sustainable value generation.
4. “Masterminding the Deal: Breakthroughs in M&A Strategy and Analysis,” Peter Clark and Roger Mills
“Every deal tends to be described by the acquiring firm’s chief executive officer as unique. They aren’t…approximately two-thirds of all deals fail, based on prevailing financial return-based criteria.”
This book might titled, “There’s a good chance your deal isn’t going to generate value and don’t say we didn’t tell you so.” The authors take such a cynical view of M&A transactions, that it can make you wonder why they write about it at all. And yet, this is an excellent analysis of M&A, part descriptive and part prescriptive. It covers everything from an analysis of the various merger waves, to the psychology involved at various stages of M&A cycles and busts several myths about how the impact of deals on companies.
Key Takeaway: The authors introduce the concepts of Net Realizable Synergies (NRS) and Acquisition Purchase Premium (APP) as ways of thinking about whether deals have been successful or not. Both are useful ways of rethinking measuring a deal’s impact.
5. “Creating Value from Mergers and Acquisitions: The Challenges,” Sudi Sudarsanam
“One of the most puzzling aspects of the merger phenomenon is the widespread perception that mergers and acquisitions do not create value for the stakeholders and in fact destroy value. If so, given the stupendous scale of the investment that mergers represent and the losses to stakeholders, including possible welfare losses to the community as a whole, we need a serious investigation of the reasons for such failure.”
Similar to the previous text on this list, Creating Value from Mergers and Acquisitions is descriptive in parts, but remains mainly prescriptive. The authors cover every part of the M&A process, from search right through to the integration process. With over 600 pages of well-divided sections and comprehensively covered topics, this book provides an excellent reference manual for anybody considering undertaking a transaction.
Key Takeaway: The key takeaway of this book may be its size, giving some indication of how much there is to learn about M&A for the average practitioner.
In summary, there are so many books which can add to the knowledge of anyone practicing M&A during any part of the transaction. This list could have been had more names – The Dark Side of Valuations by Aswath Damodaran deserves an honorable mention. There is undoubtedly something that can be learned from each of these books, however, and anybody in M&A could benefit from the perspectives they provide.