Title: Women on boards get better deals in mergers and acquisitions
Study: Women directors get better deals in mergers and acquisitions (Li, Sauder School of Business, 2013)
Finding: The more women on a corporate board the less a company pays for its acquisitions.
InPower Insight: Women’s motivations are less driven by ego, and thus introduce natural risk mitigation into the process of mergers and acquisitions, making the company better at negotiating on value.
Summary:
For the study, the researchers analyzed a large sample of acquisition bids made by S&P 1500 companies in the United States between 1997 and 2009. To determine the cost of the acquisitions, the researchers looked at the bid premium – the difference between the final offer price and the stock price of the targeted firm before the deal was signed. These figures were then correlated with the number of women directors on the various boards. Once again, women on boards makes a difference to the company’s financial performance.
“Our findings show that the prudence exhibited by women directors in negotiating mergers and acquisitions has had a substantial positive effect on maintaining firm value,” says Professor Li. “Female board members play a significant role in mitigating the empire building tendency of CEOs through the acquisition of other companies. On average, merger and acquisition transactions don’t create shareholder value, so women are having a real impact in protecting shareholder investment and overall firm performance.”
We know women on boards – at participation of 30% or more – positively impact the overall company’s performance, but this drives home the reality that women are sharp and require that companies take considered risk instead of ego-driven risk. And that force helps company’s financially!
Personal Coaching Tip: If you ever find yourself the odd-woman-out, promoting caution while men around you want to take rash action, stick to your guns. No need to make it personal, just remind everyone that an ego-driven risk comes fraught with downsides, while a considered risk is smart business. Whether you’re on the board or not, you play an important role in helping others around you look before they leap, and the business will benefit.
Keywords: women on boards, risk, financial performance, risk mitigation
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