In response to popular demand from confident CEOs, “Merger Mondays” are back: ten times this year the week has begun with the announcement of at least one company merger worth $10 billion or more.
Tuesdays, Wednesdays, Thursdays and Fridays also returned to consolidation, driven by record corporate profits, lower interest rates and newly favorable antitrust authorities.
Union Pacific’s $85 billion purchase of Norfolk Southern, which still needs approval from U.S. railroad regulators, is the world’s largest acquisition since United Technologies bought Raytheon in 2019 for $90 billion, creating a defense giant renamed RTX.
Netflix, Comcast and Paramount Skydance are in a billion-dollar battle for Warner Bros. Discovery, the toughest in Hollywood since Disney paid $71 billion for 21st Century Fox, also in 2019. Samsung Electronics has set up a mergers and acquisitions unit that can access the South Korean tech giant’s $74 billion in cash to help it thrive in the age of artificial intelligence.
In total, 32 mega-mergers worth US$700 billion have been announced in 2025. With nearly a month to go, this is already the largest number, in terms of volume and value, since the post-pandemic madness of 2021. Financial data provider LSEG recorded 63 deals exceeding US$10 billion worldwide between January and November, including private equity deals of the same size – more than in any full year since the 1970s.
Today’s executives are not affected by yesterday’s warnings. Everyone agrees that AOL’s disastrous $182 billion acquisition of Time Warner, announced months before the dot-com bubble burst in the early 2000s, was tragically mistimed and unreasonably priced.
Everyone knows this subgenre of management research according to which “study after study puts the failure rate of mergers and acquisitions at between 70% and 90%,” as Clayton Christensen, one of the most admired management scholars of recent decades, concluded in 2011. Every president firmly believes he belongs to the 10% to 30% category.
CEOs are, by nature, a confident bunch, and tend to put the “big boys” in a state of paranoia. But how concerned should shareholders be about this new consolidation rush?
Start with numbers. The world has changed since Christensen’s warning nearly 15 years ago. Maybe the companies’ record on mergers and acquisitions has changed as well? To find out, The Economist examined all completed corporate mergers worth $10 billion or more (including debt and not adjusted for inflation) announced between the beginning of 2010 and the end of November 2020.
In total, 117 blockbuster deals were executed during this period and data was available to assess the financial performance of buyers over the following five years. The value of the combined settlements was estimated at about $2.7 trillion, most of which involved American companies, and included major concerns.
In 2016, AB InBev swallowed smaller SABMiller for $103 billion. Two years later, AT&T spent $85 billion for Time Warner (which spun out AOL in 2009). The following year, pharmaceutical giant Bristol-Myers Squibb bought Celgene for $79 billion.
In the five years following the deals, the buyers’ average revenues and operating profits increased by 6% annually — which is good but not exceptional. The relationship between the market value and book value of its assets, a common valuation measure, was stable. Return on capital fell by two percentage points.
The result was a mixed balance for shareholders. Half of buyers outperformed their industry in the five years following the announcement. Its excess equity returns, higher than the sector benchmark, amounted to US$2.8 trillion. Even excluding Microsoft’s $640 billion valuation after its purchase of LinkedIn in 2016, which likely has little to do with the $26 billion paid for the professional site, the value is still impressive: $2.2 trillion.
However, the other half lagged behind by the same magnitude, accumulating losses of US$2.9 trillion. In short, failures are no longer as common today as Christensen warned, although the odds of success are still no better than a flip of a coin.
More systematic research shows that companies are actually becoming less bad at combining businesses. Last year, consulting firm Bain published a report titled “How Companies Have Become So Good at Mergers and Acquisitions.” And he discovered that the answer is that practice makes perfect.
Between 2012 and 2022, companies that made at least one acquisition per year achieved an average shareholder return of 8.5% per year. Companies that oppose this practice registered 3.7%. Between 2000 and 2010, the advantage of repeat buyers was less than half that.
Susan Kumar, co-author of the report, attributes this improvement to several factors: more rigorous due diligence processes, more focus on new capabilities and adjacent markets rather than just making broad gains in a buyer’s heart, and a preference for many smaller acquisitions rather than a single gamble that can make or break a company.
Half of this year’s major mergers are still bets on scope, not scope. Many of them are large, in absolute terms of course, but also relative to the size of the buyer. The average deal is equivalent to 46% of the buyer’s market value. Union Pacific pays two-thirds of its capital to Norfolk Southern.
In these cases, diligence is crucial. Even more so at a time of profound technological transformation. Boards should think twice before spending tens of billions of dollars on a merger, as AI could soon help companies cut costs and perhaps even increase revenues over time — the two traditional justifications for high-risk mergers. They should remember that although 50-50 odds are better than one to nine, it is still just a flip of a coin.
Text by The Economist, translated by Helena Schuster, published under licence. The original article can be found in English at www.economist.com