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Published: February 22, 2012

/ Spring 2012 / Issue 66

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Strategy & Leadership

The Capabilities Premium in M&A

by Gerald Adolph, Cesare Mainardi, and J. Neely

The capabilities orientation is particularly valuable in M&A transactions, when time is often short and the stakes high. Executives who understand their companies’ capabilities system end up with a reliable and rapid guide to sound judgment. When a seemingly attractive prospect comes along that doesn’t fit, they recognize it in time to avoid a mistake. When a deal fits, they have a more solid basis for evaluating the right price. And during the execution of the merger, they are in a better position to gain value.

Matching Intent and Fit

This study grew out of decades of experience helping companies develop business cases on prospective acquisitions and postmerger integration efforts. We noticed a pattern: When deals exceeded expectations, the acquiring companies had used their own capabilities as a starting point. In their due...