Join our community of smart investors

M&A masters: the stocks successfully buying growth

The strategy has historically been dimly viewed – but it can work for companies that take a more systematic approach
March 9, 2023

The statistics will tell you that building a business through mergers and acquisitions is fraught with risk – an oft-cited McKinsey report from 2010 declared that 70 per cent of M&A deals end up destroying shareholder value. But there is evidence that a particular type of deal can strike the right note for companies and reward their shareholders.

While dealmaking is a constant feature of the corporate landscape, the consensus among shareholders and market commentators is that organic growth represents a much less risky approach. “The attraction to organic is that there's a natural, structural growth element in the company. You can just hit a niche sometimes – you’re involved in an industry that you're just introducing a product to, and people are buying more and more of it,” says Michael Shield, a senior research analyst at Morningstar.

Alex Dacre, chief executive of compliance specialist Marlowe (MRL), notes the market views organic growth favourably "because that’s where you’re getting your long-term sustainable value creation from”.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in