Masters of the Corporate Portfolio

Business meeting

There’s a sound reason for this shift. Our research on, conversations with, and work for global companies and investors has found that in an extended period of low growth and inexpensive financing, markets see deal making (both acquisitions and divestitures, assuming they are well planned and executed) as one of the few available avenues to grow value. The Boston Consulting Group’s 2015 M&A report confirmed that companies that do their homework and practice disciplined postmerger integration can indeed acquire their way to growth in both earnings and shareholder returns. (See “Should Companies Buy Growth?,” BCG article, October 2015, and “From Acquiring Growth to Growing Value,” BCG article, October 2015.) Our 2014 report reached a similar conclusion about divestitures.

Companies can indeed transact their way to value creation, but it takes practice and a commitment to M&A as a strategic lever of the same sort as innovation or geographic or market expansion. In the accompanying articles that make up this year’s report, we explore the success of “portfolio masters”—companies that consistently reshape their corporate portfolios, using both acquisitions and divestitures as an essential component of their strategy. (We define portfolio masters as companies that execute at least five major transactions, buying or selling, over a five-year period.) (See “Are M&A Deal-Making Skills Value-Creating Skills?” and “How Portfolio Masters Make M&A Work for Shareholders,” both BCG articles, August 2016.) For these companies, M&A is a viable—and proven—value creation strategy.

Following a strong 2014, the year 2015 will go into the books as a record for global M&A deal making. But in the long run, it may also be remembered as the year in which a sea change in investors’ appetite for deals became apparent. Capital markets have long greeted acquisition announcements with skepticism—and with good reason. Research, including our own, has consistently shown that most deals destroy value. But, as we explore in the following pages, markets in recent years have behaved differently than in the past and started bidding up shares of acquiring companies—by an average of 0.5% in the seven-day window around the announcement. In the current market environment, at least, investors are showing more trust in, and higher expectations for, dealmakers.