March 29, 2022

Gender Diversity: Impact on M&A Strategies & Outcomes

How does having women in leadership positions affect M&A strategies and outcomes?  Those are the topics considered in this recent Intralinks report, which looked at over 11,000 transactions completed from January 1, 2010 to October 31, 2021. Only about 3% of those deals involved acquirers led by female CEOs, and 11% involved acquirers with at least 30% female representation on their boards, but as these highlights from the report demonstrate, these deals outperformed other transactions – even though the market initially didn’t think they would:

– Initial market reactions to women-led deals are more unfavorable than those for deals led by men. Shares of acquirers with female CEOs tended to underperform those of acquirers led by male CEOs by an average of 1.5 percentage points when looking at a 40-day window pre- and post-announcement. The onset of Covid-19 appears to have enhanced that disparity, as acquirers led by female CEOs saw their share prices underperform those led by male CEOs by an average of 9.6 percentage points for deals during the pandemic.

– Contrary to market reaction, deals completed by acquirers with female CEOs performed better than deals completed by acquirers with male CEOs in terms of share price performance, in the first, second- and third- year following deal completion. Companies with at least 30% female boards outperformed by 7.1 percentage points relative to all-male boards or those with less than 30% female representation.

– Deals led by women didn’t just outperform when it came to share price appreciation. Over a three-year period, these deals produced better ROE, EBITDA/sales and EBIT/adjusted sales than deals completed by acquirers with male CEOs. The most significant difference was post-closing ROE. When looking at this metric three years post-acquisition, companies led by female CEOs outperformed those led by male CEOs by 7.9 percentage points.

– Deals announced by female CEOs also have a slightly better chance of closing – 97% of the deals led by female CEOs closed, while 95% of those led by male CEOs closed. All of the female-led deals announced during the pandemic closed, while the male-led deals continued to close at a 95% rate.

There are all sorts of other interesting nuggets in the report, including the fact that companies involved in female-led deals were more likely to retain a financial advisor, that the targets in female-led deals involved less risk than those in male-led deals, and that female-led deals were more likely to include a reverse termination fee.

John Jenkins