The landscape of corporate strategy is undergoing a significant transformation, with chief executive officers increasingly viewing mergers and acquisitions (M&A) not merely as an option, but as a critical lever for accelerating growth and navigating an increasingly volatile global environment. A comprehensive new study, the Oliver Wyman Forum’s third annual CEO Agenda survey, reveals that an overwhelming majority of CEOs are planning to pursue M&A activity in the next two years, signaling a decisive shift towards inorganic expansion. This trend necessitates a proactive and strategic approach from corporate boards, who must align closely with their CEOs to ensure these ventures are not only successful but also contribute to sustained competitive advantage.
The report, which surveyed 415 CEOs representing approximately 10 percent of global market capitalization, paints a clear picture of executive intent. A staggering 94 percent of these leaders indicated plans to engage in mergers and acquisitions within the coming 24 months. Furthermore, nearly two-thirds of the surveyed executives intend to leverage industry consolidation as a primary mechanism to build scale and enhance their competitive standing. This widespread commitment to M&A suggests a collective recognition that organic growth alone may be insufficient to meet the ambitious targets and navigate the complex challenges of the current economic climate.
The Urgency of M&A in a Disruptive Era
Ana Kreacic, a partner and chief operating officer at the Oliver Wyman Forum, underscored the proactive stance of today’s CEOs in a statement accompanying the report’s release. "CEOs are no longer waiting for stability before they act," Kreacic explained. "They are converting disruption into a competitive advantage and seeking to buy the scale and capabilities that take too long to build." This sentiment highlights a fundamental shift in strategic thinking, where M&A is being deployed not as a defensive measure, but as an offensive strategy to acquire speed, market share, and essential competencies.
The survey data further substantiates this rationale. A substantial 42 percent of CEOs planning M&A deals specifically aim to acquire new capabilities and intellectual capital. This figure rises significantly among larger corporations, with 54 percent of the largest companies expressing this intent. Companies operating in sectors characterized by rapid technological change are even more acquisitive in their approach to intellectual capital, with over 55 percent planning to acquire new capabilities and knowledge through M&A. This focus on acquiring intangible assets – such as proprietary technology, specialized expertise, and innovative business models – reflects a strategic imperative to stay ahead of the curve in innovation-driven industries.
A Timeline of Shifting M&A Strategies
The increasing reliance on M&A for strategic growth has been a developing trend over the past few years. Post the initial shockwaves of the COVID-19 pandemic, many companies initially adopted a wait-and-see approach. However, as global economic uncertainties persisted, coupled with rapid technological advancements and evolving geopolitical dynamics, CEOs began to recognize the limitations of purely organic expansion.
- 2022-2023: A period of cautious optimism and selective M&A, with a focus on resilience and digital transformation. Companies began to identify critical gaps in their capabilities that could be addressed through targeted acquisitions.
- 2024: The current year marks a significant acceleration, with the Oliver Wyman Forum survey indicating a broad-based commitment to M&A. CEOs are moving from tentative exploration to decisive action, driven by the need to adapt to rapidly changing market conditions.
- 2025-2026: The projected period for intensified M&A activity, as companies execute their strategic plans to acquire scale, capabilities, and market positioning. This phase is expected to see a significant amount of industry consolidation.
The current environment, characterized by supply chain disruptions, inflationary pressures, and geopolitical realignments, has created a complex operating landscape. In this context, M&A offers a rapid path to de-risk operations, secure essential resources, and gain a more robust competitive footing.
Key Considerations for Corporate Boards
With such a significant portion of CEOs prioritizing M&A, corporate boards have a critical role to play in guiding and scrutinizing these strategic initiatives. To effectively support their CEOs and safeguard shareholder value, boards should proactively engage with a series of fundamental questions.
Defining the Acquisition and Merger Selection Process
A cornerstone of successful M&A is a well-defined and rigorously applied process for selecting acquisition or merger targets. The board must ensure that this process is not only robust but also objective, incorporating comprehensive due diligence at every stage. The potential for negative repercussions from a poorly chosen partner is substantial, impacting future growth trajectories, financial performance, and even corporate culture.
- Alignment on Criteria: Boards and CEOs need to establish clear, measurable criteria for evaluating potential targets. This should go beyond financial metrics to include strategic fit, cultural compatibility, technological synergy, and the potential for operational integration.
- Due Diligence Rigor: The depth and breadth of due diligence are paramount. This includes financial, legal, operational, and commercial due diligence, as well as an in-depth assessment of the target’s technology, intellectual property, and human capital. Are the right experts involved in scrutinizing these areas?
- Experience and Expertise: The M&A experience of both the CEO and board members is a critical factor. Boards should assess whether their current composition possesses the necessary expertise. If gaps exist, they must consider engaging third-party consultants or recruiting new board members with proven M&A track records. The input from key executives in finance, human capital, legal, and operations must be integrated to ensure a holistic evaluation.
Clarifying Purpose and Quantifying Benefits
A clear and shared understanding between the board and CEO regarding the purpose and anticipated benefits of any M&A transaction is non-negotiable. Without this alignment, the integration process can falter, and strategic objectives may be missed.
- Strategic Rationale: What specific strategic objectives does this M&A activity aim to achieve? Is it to enter new markets, acquire a competitor, gain access to critical technology, or achieve economies of scale?
- Synergy Identification and Realization: Boards must scrutinize the identified synergies. Are they realistic and quantifiable? This includes revenue synergies (e.g., cross-selling opportunities, market expansion) and cost synergies (e.g., operational efficiencies, reduced overhead). A detailed plan for realizing these synergies is essential.
- Market Impact and Business Model Evolution: How will the proposed merger or acquisition impact the company’s market position? Will it create new market opportunities or consolidate existing ones? Will it necessitate a significant change in the current business model or operational structure?
- Shareholder Communication: A robust communication strategy is vital to secure shareholder approval and manage expectations. Boards must be prepared to articulate the compelling benefits of the transaction in a clear and convincing manner.
Board Composition in a Merged Entity
The prospect of mergers and acquisitions inevitably raises questions about the future composition and role of the board itself. When two companies combine, the governance structures must adapt to the new entity.
- Director Fit and Skillset: Directors of the acquired company will likely need to seek opportunities elsewhere, though a select few with critically important expertise may be absorbed into the acquiring company’s board. Similarly, directors of the acquiring company must assess whether their existing skillsets and experience remain relevant and valuable to the newly formed organization. Experience in post-merger integration, for instance, could become a highly sought-after attribute.
- Board Governance Evolution: The board of the combined entity will need to establish a clear governance framework, including the appointment of new committee chairs and members, and the redefinition of roles and responsibilities. This process requires careful consideration to ensure effective oversight and decision-making.
- Career Trajectories for Directors: For directors who have successfully navigated M&A transactions, this experience can enhance their attractiveness to other companies engaged in similar strategic endeavors. Opportunities to serve on multiple boards or to move into more prominent leadership roles within other organizations may arise.
Broader Impact and Implications
The surge in M&A activity has far-reaching implications beyond the immediate parties involved. It signals a period of intense competition and strategic repositioning across various industries.
- Industry Consolidation: The stated intention of many CEOs to leverage industry consolidation suggests that some sectors may see a significant reduction in the number of players, leading to increased market concentration. This could impact pricing power, innovation dynamics, and the competitive landscape for smaller businesses.
- Talent Acquisition and Retention: M&A can lead to significant shifts in talent. While acquiring companies may gain new capabilities, integrating workforces can be challenging. Companies that prioritize cultural integration and employee well-being during the M&A process are likely to retain key talent and foster a more productive post-merger environment.
- Innovation Ecosystems: The acquisition of intellectual capital and new capabilities by larger entities can reshape innovation ecosystems. It may accelerate the diffusion of new technologies or, conversely, lead to the consolidation of R&D efforts, potentially impacting the pace of disruptive innovation.
- Regulatory Scrutiny: With increased M&A activity, particularly in sectors deemed critical or experiencing rapid consolidation, regulatory bodies may increase their scrutiny of proposed transactions to ensure fair competition and prevent monopolistic practices. Antitrust reviews and approvals could become more protracted and complex.
In conclusion, the Oliver Wyman Forum’s CEO Agenda survey underscores a decisive strategic pivot towards mergers and acquisitions as a primary engine for corporate growth. As CEOs embrace this proactive approach to navigating disruption and building competitive advantage, corporate boards are presented with a critical opportunity—and responsibility—to engage deeply in the strategic planning, due diligence, and governance of these transformative initiatives. By posing the right questions and fostering robust dialogue, boards can play an instrumental role in ensuring that M&A endeavors yield sustainable value and position their organizations for long-term success in an ever-evolving global marketplace.
