M&A Activity by Year: Collected Reports

The 2017 M&A Report: The Technology Takeover

The 2016 M&A Report: Masters of the Corporate Portfolio

The 2015 M&A Report: Increasing Returns with M&A

The 2014 M&A Report: Don’t Miss the Exit

Winning at M&A in Emerging Markets: BRICs Versus Mortar? [2013]

Riding the Next Wave in M&A: Where Are the Opportunities to Create Value? [2011]

Seize the Opportunities in M&A: Accelerating Out of the Great Recession [2010]

The data set we used as the basis for the analyses in BCG’s M&A research (the “M&A database”) comprises approximately 924,000 M&A deals covering the period from January 1980 through June 2022. In assessing general market trends, we analyzed reported M&A transactions from 1990 through the first half of 2022. For the analysis of deal values and volumes, we excluded transactions marked as self-tenders, recapitalizations, exchange offers, repurchases, privatizations, and spinoffs.

In addition to using our proprietary data and analytics, we collected and collated financial data and relied on information from various data providers, including Refinitiv Eikon, Refinitiv DataStream, and S&P Capital IQ.

Our review of the definitions of ESG and sustainability indicates that they have similar meanings and tend to be used interchangeably. BCG defines sustainability as “an organization's delivery of value in financial, environmental, social, and governance terms to itself, its stakeholders, and society at large, in the short and the long term.”

To identify ESG M&A activities, we developed a dictionary of 591 ESG terms (for example, carbon capture within the environmental component of ESG, occupational health within the social component, and board diversity within the governance component). The terms reflect usage in existing ESG frameworks (such as the United Nation’s Sustainable Development Goals and the European Union’s taxonomy for sustainable activities), banks’ and investors’ definitions of ESG investing, and academic research. In addition, we adopted Refinitiv’s classification of sustainable finance when defining environmental deals, and we included health care and education in the definition of social deals; the latter follows the approach that the UN’s Sustainable Development Goals uses. We applied this dictionary to screen the “target business description,” “deal synopsis,” and other relevant data fields available from data providers.

In total, the initial deal sample for this year’s analyses included 151,604 ESG M&A transactions, of which 38,968 are environmental M&A transactions (the report refers to these as “green deals”). We excluded transactions marked as self-tenders, recapitalizations, exchange offers, repurchases, privatizations, and spinoffs, and we focused on the period from 2001 through 2021. This yielded a final sample of 119,201 ESG transactions and 32,766 environmental transactions. Depending on the analysis, the sample size varies as a result of additional data requirements.

Short-Term Value Creation

Although analyzing different issues required the use of distinct samples, we employed the same econometric methodology to all return analyses.

To determine the “announcement return,” we derived the cumulative abnormal return (CAR), by taking the difference between the actual return on the acquirer’s stock (P_acq) and the return realized in the sector index (P_index) as an approximation for expected returns, starting three days before the announcement date (–3d) and ending three days after it (3d). (See Equation 1.)

EQUATION 1

Long-Term Value Creation

For M&A deals, we tracked the stock market performance of the acquirers or the sellers over periods of different length following the acquisition announcement. Note that we could not track the targets because, in most cases, they are delisted from the public-equity markets.

First, we measured the total shareholder return (TSR) generated by the acquirer or seller over a time period of length t. (See Equation 2.)


EQUATION 2



Second, we subtracted from the TSR the return made by a benchmark index over the same period, in order to find the relative total shareholder return (RTSR) generated by the acquirer or the seller—in other words, the return in excess of the benchmark return.1 (See Equation 3.)

EQUATION 3


Note that we could not include all deals in this analysis because, for some deals, the time elapsed since the announcement was too short to allow us to calculate the returns.

¹ _{The benchmark indexes we applied are the relevant worldwide Refinitiv (formerly Thomson Reuters) indexes.}

We applied common-practice statistical significance tests to all of our quantitative results in this report. To assess whether means were statistically different from zero, we used one-sample t-tests; and where appropriate, we used two-sample t-tests to determine whether the difference between means was significantly different from zero—that is, whether two groups did in fact have different means.

Generally, for longer-term analyses (such as one- and two-year RTSR) and for the short-term analysis (that is, CAR), we used relative measures of size impact (such as deal value compared to the enterprise value of the acquirer) as well as absolute measures of size (such as deal value) to determine whether a transaction was sufficiently material to have had an impact on overall performance.