As per ACORD’s Carrier Mergers & Acquisitions study, only 52% of last decade’s largest M&A transactions created long-term value.
The firm’s new study, set to be officially presented at ACORD Industry First on May 21st, screened nearly 15,000 transactions, focusing on those publicly disclosed valued at $1 billion or greater.
The deals analysed in-depth reportedly represented a total value of nearly $290 billion, accounting for more than one-third of the value of all carrier M&A transactions worldwide.
According to the disclosed results, mid-sized deals performed better than the largest or smallest transactions studied.
Bill Pieroni, President and CEO of ACORD, noted that while the largest deals may garner headlines and high hopes, they typically are not the most likely ones to create value in the long term.
Pieroni continued, “A transaction that is too large may simply be too big for the acquirer to successfully digest. One that is too small, on the other hand, may not draw sufficient attention and oversight.
“Insurers must carefully consider their ability to manage existing operations without disruption, while effectively integrating the benefits they hoped to achieve by the transaction.”
Pieroni also observed that the variations in long-term performance were interesting, and sometimes surprising, noting that the outcomes of these deals differed widely across lines of business, even when motivated by the same rationales.
In total, P&C carriers experienced higher-than-average returns after M&A transactions in all four motivation categories, with 70% of the P&C deals creating value throughout the analysis period.
ACORD stated that diversification was by far the most successful motivation among P&C insurers but was less successful in other lines of business.
Meanwhile, Life insurers faced difficulties regardless of the rationale behind the deal, with just 36% of all life M&A transactions creating value.
As for Reinsurers, ACORD saw mixed results, with the segment creating value in just half of acquisitions overall, with high performance limited mostly to deals motivated by core expansion.
