A recent study on M&A turned up a surprising statistic. Between 1984 and 1994, some 80% of LBO firms reported that their fund investors had received a return that matched or exceeded their cost of capital, even though in many cases the prices paid for the companies those funds acquired were pushed up by competing bidders. That figure stands in stark contrast to the overall record of M&A investments, which from the corporate acquirer’s perspective has been dismal, at times disastrous.
A version of this article appeared in the November–December 2000 issue of Harvard Business Review.