The 2020 M&A Report: Alternative Deals Gain Traction

The M&A Market Has Already Turned the Corner, BCG Study Finds, as Bold Dealmakers Pursue Downturn Opportunities

Amid the Disruption and Uncertainty, Dealmakers Increasingly See Alternative Deals—such as Joint Ventures, Strategic Alliances, and Corporate Venturing—as Effective Ways to Access New Capabilities and Reduce Risk

MUNICH—If history is any indication, dealmakers have reason to be cautiously optimistic about a near-term revival of the M&A market. A study by Boston Consulting Group (BCG) in collaboration with Professor Sönke Sievers of Paderborn University finds that, after a sharp decline, monthly M&A deal volume has already returned to the low end of the historically normal level. The findings are detailed in BCG’s 2020 M&A report, titled Alternative Deals Gain Traction, released today.

To assess today’s M&A market in a historical context, the study looked at global M&A deals valued at more than $500 million since 2007. The pace of activity was generally in the range of 40 to 70 transactions per month during the past ten years. Monthly activity fell below this range in consecutive months twice: at the height of the financial crisis in late 2008 through mid-2009 and in the first half of 2020. Initially, the drop-off in M&A activity in the current crisis was worse than in the 2008–2009 crisis. But a clearly discernible uptick occurred during June through August, as monthly deal activity exceeded 40 transactions.

“Indeed, the uptick in M&A activity that began in June suggests that the M&A market has already turned the corner in recovering from the crisis,” said Jens Kengelbach, a BCG senior partner, the firm’s global head of M&A, and a report coauthor. “Although a return of major COVID-19 lockdowns could set back the recovery, bold dealmakers view the downturn as creating attractive opportunities to pursue strategic objectives—through classic M&A as well as alternative deal structures.”

Alternative Deal Making Is On the Rise, But Value Creation Is a Coin Toss

The study also examined how the pandemic could affect deal making in the coming years. Because the pandemic-induced disruptions have reinforced technology megatrends—such as advanced analytics and automation—many companies need to rapidly gain access to new talent and capabilities. This promotes not only classic M&A but also alternative deal structures. In alternative deals, rather than acquiring control of and integrating a target, companies acquire minority stakes or establish cooperative arrangements—such as through joint ventures (JVs), strategic alliances, or corporate venture capital investments.

From the perspective of short-term value creation, investors appear to be increasingly receptive to companies’ use of JVs and alliances to enable collaboration or even to replace classic M&A. The study found that, from 1990 through mid-2020, announcement returns trended higher for both JVs and alliances. Longer-term value creation, however, has been more challenging. Less than half of all JVs and alliances create returns that outperform their industry (as measured by relative total shareholder return) after one or two years.

“Even JVs and alliances that are signed on the basis of a sound value-creation story require rigorous implementation, good governance, and continuous monitoring to create longer-term value,” said Georg Keienburg, a BCG partner and a report coauthor. “In this respect, they are analogous to M&A deals that must overcome the challenges of integration and synergy realization in order to ultimately succeed.”

The results of a BCG survey of corporate dealmakers reinforce the empirical finding that alternative deals have mixed results in terms of value creation. Respondents said that from their perspective approximately 40% of alternative deals fail—that is, they do not achieve their stated financial and/or strategic goals. Respondents considered only approximately 60% of deals to be successful once the dust settles. Alternative deals fared no better than classic M&A with respect to perceived failure and success rates.

How to Win in Alternative Deals

To master alternative deals, the authors recommend that companies:

  • Get an early start developing a long-term plan for alternative deals that advances your overall strategy.
  • Do not skimp on due diligence, even though that may be tempting given the seemingly lower financial stakes compared with classic M&A.
  • Clearly define, negotiate, and formalize postdeal governance before signing, and make governance a top-management task.
  • Use people with explicit experience in alternative deals to negotiate and manage these arrangements, and seek external support, if necessary.
  • Define and implement transparent and feasible incentive schemes for key decision makers in the alternative deal process.

To arrange an interview with one of the authors, please contact Eric Gregoire at +1 617 850 3783 or

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