DealLawyers.com Blog

Last month, Boston Consulting Group released its 2023 M&A Report in four chapters. Since these reports have been issued annually since 2003, the first chapter, “Ten Lessons from 20 Years of BCG’s M&A Report,” discusses long-term trends over the last two decades and key takeaways.

It highlights the importance of having a well-developed M&A strategy and a tailored and rigorous approach to integration as well as the increased likelihood of success of serial acquirers of small to midsize targets and cash-only transactions with low multiples paired with high premiums over current valuations.

It also discusses alternative deal types, noting that the data shows they are increasing in frequency. Here’s an excerpt:

Traditionally, the default tool for dealmakers has been the plain-vanilla 100% acquisition, on both the buying side and the selling side. For instance, over the past two decades, majority deals outnumbered minority ones by about 3 to 1, although the annual ratio has evolved from 4 to 1 two decades ago to 2 to 1 more recently, largely owing to the rise in VC financing. The attraction of majority deals is clear: they are relatively simple to value and negotiate, and they are amenable to straightforward governance after closing. But in today’s ever-more-complex M&A and business landscape, this approach is not always optimal.

We have observed a consistent rise in alternative deal types, such as minority shareholdings, joint ventures, strategic partnerships, and corporate venturing. These structures may be more complex to execute and manage after closing, but they open new strategic options by giving dealmakers much-needed flexibility to customize capital allocation in response to specific conditions. Given the shift from the past decade’s abundant capital to the current scarcity, these alternative approaches have become an indispensable part of an experienced dealmaker’s toolbox.

– Meredith Ervine