Fueled by the enthusiasm – and arrogance – of many CEOs, Merger Mondays are back: Ten times this year, the work week began with news of at least one corporate deal worth $10 billion or more. Merger Days on Tuesdays, Wednesdays, Thursdays and Fridays are also back, fueled by record profits from big companies, lower interest rates and surprisingly friendly antitrust regulators.
Union Pacific’s $85 billion purchase of Norfolk Southern – which still requires approval from U.S. railroad regulators – is the world’s largest acquisition since United Technologies’ acquisition of Raytheon in 2019. for $90 billion to create the defense giant now called RTX. Samsung Electronics has launched a mergers and acquisitions (M&A) division that can draw on the South Korean tech giant’s $74 billion in cash to help it thrive in the AI era.
In total, 32 corporate mega-mergers worth $700 billion were announced in 2025. With almost a month to go, it is already the largest number – and the largest value – since the post-pandemic euphoria of 2021. LSEG, a financial data provider, counts 63 deals worth more than $10 billion between January and November, including leveraged buyouts of the same size: more than in any full year since its records, which date back to the 1970s.
Today’s CEOs are undeterred by the warnings of the past. Everyone agrees that AOL’s disastrous $182 billion takeover of Time Warner, announced months before the Internet bubble burst in 2000, was tragically mistimed and comically mispriced. Everyone is familiar with the subgenre of management research that claims that “study after study puts the failure rate of mergers and acquisitions at 70% to 90%,” as Clayton Christensen—one of the most respected management scholars of the last few decades—and his colleagues noted in 2011. Every boss is firmly convinced that he (almost always a man) belongs to the 10/30 percent.
CEOs are, by nature, a self-sufficient bunch prone to lapsing into megalomania. But how nervous should shareholders be about this new wave of merger appetite?
Let’s start with the statistics. The world has changed since Christensen’s warning fifteen years ago. Maybe also fusion power? To find out, Schumpeter analyzed all mergers worth $10 billion or more (including debt and not adjusted for inflation) announced between early 2010 and late November 2020.
A total of 117 megamergers were completed during this period, for which data on the financial performance of the buyers was available five years later. The operations totaled $2.7 billion, affected mostly U.S. companies and included several alarming cases. In 2016, AB InBev acquired SABMiller, a smaller brewer, for $103 billion. Two years later, AT&T paid $85 billion for Time Warner (which had been spun off from AOL in 2009). A year later, Bristol-Myers Squibb, a pharmaceutical giant, paid $79 billion for Celgene.
In the five years following the deal, the average buyer’s revenue and operating profit grew at an annual rate of 6%, decent but not extraordinary. The ratio between its market capitalization and the book value of its assets, a common valuation measure, remained unchanged. Return on equity, a measure of profitability, fell by two percentage points.
This resulted in a mixed outcome for shareholders. Half of buyers outperformed their industry within five years of the announcement. Its “excess” equity returns, above the benchmark index for its sector, totaled $2.8 trillion. Even if you ignore the $640 billion jump in Microsoft’s market value after its purchase of LinkedIn in 2016 — a jump that likely had little to do with the professional network’s $26 billion acquisition — the number is still impressive: $2.2 trillion. However, the half that lagged did so with equal force, accumulating relative losses of $2.9 trillion. In short, failure is no longer as common today, as Christensen warned, although the odds of success are still no better than a coin toss.
More systematic research shows that companies have actually gotten better at mergers. Last year, Bain, a consulting firm, released a report titled “How Companies Got So Good at M&A.” The answer: practice makes perfect. Between 2012 and 2022, companies with at least one acquisition per year generated an annual shareholder return of 8.5%. Companies with a low propensity to buy achieved just under 3.7%. Between 2000 and 2010, the advantage of serial buyers was less than half. Suzanne Kumar, co-author of the report at Bain, attributes this to several factors: stricter due diligence; Greater focus on new capabilities or adjacent markets rather than simply increasing size; and the preference for lots of small purchases rather than one total commitment.
Half of this year’s megamergers continue to be about scale, not scope. Many are large – in absolute terms, of course, but also relative to the size of the buyer. The median transaction represents 46% of the acquirer’s market value. Union Pacific is paying two-thirds of its equity for Norfolk Southern.
This is even more true in a time of profound technological change. Boards should think twice before spending tens of billions on a merger when AI could soon help companies cut costs and even increase revenue over time – the two classic justifications for an M&A mega-bet. And they should remember that these 50:50 odds, while better than one in nine, are still a mistake.
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