When a chief executive unveils a big merger, the fretting begins. Concerns about a repeat of disasters like AOL-Time Warner or Bayer-Monsanto immediately spring to mind. It’s a particular concern for 2025 as steadier interest rates and laxer antitrust enforcement augur a resurgence of chunky M&A. When acquisitions reach $10 billion or more, however, the worst fears of shareholders are often confirmed, with a handful of instructive exceptions.

There was some $660 billion of mega-deals last year according to LSEG, a small uptick from 2023 but far short of the more than $1 trillion in 2019 and 2015. Over the past five years, whoppers have accounted for about a fifth of total deal activity, down from the 27% over the previous half-decade. Blue-chip bosses probably will take advantage of the improving conditions to catch up.

Central banks in the United States and Europe are slashing borrowing costs, which should help debt-funded dealmaking. And buoyant markets will further encourage corporate bosses and their boards. The S&P 500 Index (.SPX), opens new tab and MSCI All-Country World Index are up 25% and 18%, respectively, from 12 months ago.

Competition authorities also seem poised to ease up on their recent aggression. U.S. President-elect Donald Trump’s nominee to run the Federal Trade Commission, Andrew Ferguson, has promised to end
, opens new tab
 outgoing Chair Lina Khan’s “war on mergers,” according to Punchbowl News. The changing approach might give the green light to deep-pocketed deal-makers such as Exxon Mobil (XOM.N)
, opens new tab
, Comcast (CMCSA.O)
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 and Google parent Alphabet (GOOGL.O)
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. In Brussels, new anti-monopoly czar Teresa Ribera wants the European Union’s rules to “evolve” so that companies can bulk up. It’s no wonder investment bankers anticipate a busy year.

A line chart showing the figure starting at 35% in 2015 and falling to hover around 20% since 2021.
A line chart showing the figure starting at 35% in 2015 and falling to hover around 20% since 2021.

There’s less for shareholders to cheer, however, based on a Breakingviews analysis of 60 transactions since 2020 where both the acquirer and target were publicly listed and the deal was worth at least $10 billion, including debt. The sample starts with payments processor Worldline’s (WLN.PA), opens new tab $10 billion acquisition, opens new tab of French peer Ingenico five years ago and ends with the $23 billion takeover of Marathon Oil by ConocoPhillips (COP.N), opens new tab announced last May. In each case, the buyer’s total shareholder return, including reinvested dividends, was measured from the day before the deal’s disclosure and compared to the equivalent performance of a relevant industry index over the same period.

The results are dispiriting. Three-quarters of buyers trailed their sector benchmark. The median acquirer lagged its industry index by 5 percentage points, in annualized total return terms, while the mean underperformance was 7 percentage points, dragged down by conspicuous flops like Teladoc Health’s (TDOC.N), opens new tab $18.5 billion 2020 purchase, opens new tab of Livongo Health and the 2021 union of Discovery and Warner Media. The entertainment conglomerate has delivered a minus 30% annualized return since the last trading day before announcing their merger, compared with minus 13% for LSEG’s United States Broadcasting Total Return Index .TRXFLDUSTBCST, implying a 17 percentage point drag in annual terms.

By industry, CEOs in financial services and healthcare are particularly bad at mega-deals, with buyers on average trailing their relevant benchmarks by 9 percentage points and 10 percentage points, respectively, in annualized terms. Some of the medical misses, which includes pharmaceuticals, seem to be cautionary tales in overpaying. Pfizer’s (PFE.N), opens new tab $43 billion Seagen acquisition, for example, looked expensive when agreed, opens new tab in early 2023, and its stock has subsequently lagged the S&P 500 Pharmaceuticals and Biotechnology Index by roughly 20 percentage points, according to annualized LSEG data. The $150 billion drugmaker recently attracted the attention of pushy investor Starboard Value, whose gripes include boss Albert Bourla’s M&A track record.

A table with embedded bar charts showing that healthcare deals have a lower mean and median relative return than other industries, with financial services close behind
A table with embedded bar charts showing that healthcare deals have a lower mean and median relative return than other industries, with financial services close behind

The insipid stock-market reception to banking M&A also offers pause for thought. Neither Royal Bank of Canada’s (RY.TO), opens new tab$10 billion purchase, opens new tab of HSBC Canada in 2022, nor National Commercial Bank’s $15 billion deal, opens new tab with Saudi peer Samba Financial, set the world alight. Both acquirers have fallen short of their listed regional peers. It’s a bad omen for Italy’s $70 billion UniCredit (CRDI.MI), opens new tab as CEO Andrea Orcel mulls bids for rivals Commerzbank (CBKG.DE), opens new tab and Banco BPM (BAMI.MI), opens new tab. There are many ways to go wrong in financial services mergers, so the absence of an obvious boost in stock prices raises doubts about the risks involved.

Energy investors at least have seen buyers on average perform only slightly worse than their benchmark, helped by Chesapeake Energy’s move on Southwestern Energy a year ago to form Expand Energy (EXE.O), opens new tab. It’s early days, but the combined company’s shares have trounced those of peers so far. The value of the targeted cost savings more than justified the premium boss Nick Dell’Osso paid, Breakingviews calculated at the time. Diamondback Energy’s (FANG.O), opens new tab $26 billion purchase of Endeavor Energy Resources also has fared well by return standards.

Those exceptions, however, speak to the rarity of gigantic deals. They involved hefty synergies and stock-based components, meaning both sets of owners shared in the benefits. The dynamic tends to make price negotiations less contentious. Just as importantly, the target business models are similar to those of the new owners, meaning fund managers are essentially getting more of what they already want.

Precious few CEOs are blessed with slightly smaller versions of their own large outfits that also provide low-risk cost savings and are willing to swap shares. It’s one reason why so many of them get creative with their deal structures and overestimate the value they can create. By all means, let the buyer beware, but also be sure to beware the buyers.

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