The Mergers and Acquisitions Research Centre (Marc) at Cass Business School in London has just published a paper on the deal-making record of new CEOs. Its analysis challenges some long-held prejudices about the wisdom (or otherwise) of hasty executive action.
Marc’s key findings were as follows. CEOs who carry out a big deal in their first year outperform their peers in the long run. However, attempting more than one major deal in that first year leads to poorer performance. The message? A big strategic change may be a good idea, but do not attempt more than one.
CEOs who choose to sell a part of the business early on outperform those who make an acquisition – but this only holds true in their first two years in the job. This finding reflects the actions of distressed companies that need the cash injection of a sale.