Do you have the right people on your team to handle M&A deals?

When your organisation is undertaking a major change management project, such as a merger or acquisition, it pays to have the right people on board.

In such massive financial transactions, which can spell success or disaster for your firm, making sure you enlist the services of individuals with the right experience is critical.

This is highlighted by a new report from the University at Buffalo School of Management, which revealed that companies that have board directors with an investment banking background are more likely to succeed in the M&A market.

The study, which was published in the Journal of Financial Economics, suggests that directors with a wealth of investment banking experience can help their organisations make better acquisition decisions and are more likely to step into the M&A market in the first place. These decisions include which businesses to acquire, for instance, as well as a more accurate gauge of the value of the target business. 

Feng (Jack) Jiang, assistant professor of finance and managerial economics at the University at Buffalo, said the study highlighted the importance of relevant experience and financial literacy to board directors.

“We found that, all other things being equal, firms with investment banking directors on the board are more than 13 percent more likely to make acquisitions the following year,” he explained.

In conducting the study, the researchers scrutinised more than 40,000 observations spanning the decade between 1998 and 2008, and found a correlation between the presence of investment banking experience in the boardroom and the likelihood of the firm to make acquisitions.

They also found that companies with investment banking directors can expect to see around 0.8 per cent higher abnormal announcement returns than those without.

The research highlights the importance of stringent recruitment and selection practices when selecting your business's next leaders, as their background can prove vital in endeavours such as mergers and acquisitions. When the time comes to step into the market, making the most of M&A consulting specialists can add that extra bit of reassurance you need.