How female board-level representation affects corporate dealmaking: An SS&C Intralinks study


Tuesday, February 18, 2020 | By Philip Whitchelo, VP Market Insight & Analysis

How female board-level representation affects corporate dealmaking: An SS&C Intralinks study

Is there a gulf between market perception when it comes to male and female CEOs and the actual operational outcomes of mergers and acquisitions (M&A) deals? There may very well be, according to research conducted by SS&C Intralinks and the M&A Research Centre at Cass Business School, London.

The newly published report, Gender Diversity and M&A Outcomes: How Female Board-Level Representation Affects Corporate Dealmaking, produced in association with Acuris Studios, suggests that while acquisitions by female CEOs and more gender-balanced boards lead to higher company operating performance (i.e., these acquirers appear to engage in better acquisitions than male CEOs and all-male boards), this performance is not always recognized by the market, as acquirers with female CEOs underperform acquirers with male CEOs on both short-term and long-term shareholder value measures.

The SS&C Intralinks study analyzed more than 16,700 M&A deals announced between 1999 and 2018. In addition, interviews with 40 board members—20 male and 20 female—of publicly traded companies were conducted. Specifically, the study looked at whether gender diversity at the CEO- and board-level of corporate acquirers affects the types of deals undertaken. It also looked at the effects of gender diversity-related to other key measures of M&A success such as share price performance, growth, profitability, return on capital, and shareholder value.

Key findings include:

  • The short-term share price performance of acquirers with boards where the percentage of female members is 30% or higher is better than acquirers with all-male boards or boards with a low percentage of female members.
  • The long-term shareholder value performance (total shareholder returns, or TSR) of acquirers with boards where the percentage of female members is 30% or higher is better than acquirers with all-male boards or boards with a low percentage of female members. The average TSR of acquirers with 30% or higher female board members was 1.8, 0.4 and 0.8 percentage points higher one, two and three years, respectively, post-acquisition, than firms with all-male boards or boards with a low percentage of female members.
  • The characteristics of acquisitions by firms with at least one female board member match more closely the predictors of deal success we have identified in previous studies,[1] than those of acquisitions by firms with all-male boards. Targets of acquirers with at least one female board member have higher sales growth, higher profitability, higher leverage, higher liquidity (an indicator of lower financial stress) and higher valuations (an indicator of growth opportunities) than targets of acquirers with all-male boards. Acquirers with at least one female board member are more risk-averse than their all-male board counterparts: they undertake smaller acquisitions relative to the size of the acquirer, announce fewer cross-border acquisitions and more frequently employ multiple financial and legal advisers on deals.
  • Despite additional findings that acquisitions by firms with female CEOs and more gender-balanced boards lead to significantly higher company operating performance than acquisitions by firms with male CEOs or all-male boards (including measures such as return on assets and equity, sales growth and EBITDA/sales margins), this is not always recognized by the market. Our study shows that acquirers with female CEOs significantly underperform those with male CEOs both in the short-term share price reaction to deal announcements (where underperformance is around 1.1 percentage points) and in long-term shareholder value measures (where underperformance is 4.8, 3.4 and 3.7 percentage points over one, two and three years, respectively).
  • Overall, the findings strongly suggest an investor bias against dealmaking activity by female CEOs.

Key findings summary

Graph shows the relationship between market reaction, operating performance, and gender

To learn more about this report, please visit SS&C Intralinks’ site.

 

[1] Masters of the Deal, Attractive M&A Targets and Abandoned Acquisitions, all published by SS&C Intralinks based on research conducted together with Cass Business School.



Company News and Events


Theme picker