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Clinical studies of M&A cases offer insights into the possible origins of the returns experience for outliers. Here are conclusions from some of these studies.

 ATT/NCR. Lys and Vincent (1995) examined the 1991 acquisition of NCR Corporation by AT&T. This acquisition decreased the wealth of AT&T shareholders by between $3.9 billion and $6.5 billion. The study offered three explanations for these results. The first was a set of managerial objectives that were not consistent with maximizing shareholder wealth. The second was managerial overconfidence, or hubris. And the third was “escalation of commitments,” a psychological phenomenon that spurs decision makers to move forward despite information to the contrary.

 Renault/Volvo. Bruner (1999) examined the failed attempt to merge AB Volvo with Renault in 1993. The attempt temporarily erased 22 percent of Volvo’s market value before Volvo’s board of directors withdrew from the deal. The study suggests that the value destruction was associated with disbelief in merger synergies and with the transfer of control to Renault.

 Leveraged buyout of Revco D.S. Bruner and Eades (1992) and Wruck (1991) studied the bankruptcy of one of the largest leveraged buyouts in the retailing industry, that of Revco Drug Stores. The failure was associated with overpayment, the use of extremely high debt financing, and the arguably self-serving behavior of management.

 Cooper Industries’ acquisition of Cameron Iron Works, and Premark’s acquisition of Florida Tile. Kaplan, Mitchell, and Wruck (1997) studied two acquisitions that experienced very different stock market reactions to their announcements (one positive, the other negative). Interviews after the fact revealed that neither acquisition succeeded in creating value. Causes were inappropriate incentives, incomplete knowledge of the target, and the imposition of inappropriate organizational designs on the target.

 Campeau’s acquisition of Federated. Kaplan (1989) found that the value of Federated’s assets increased under Campeau’s ownership up to the point of bankruptcy filing. He does not identify the source of value creation, but suggests cost cuts, sale of underutilized assets, and tax benefits.

 Takeover fight for Paramount by Viacom and QVC. Hietala, Kaplan, and Robinson (2002) isolated the bidder overpayment and synergies implied in the stock price movements in this contest. They estimate that Viacom overpaid for Paramount by more than $2 billion despite the fact that Sumner Redstone, the CEO of Viacom, owned about three-quarters of the firm.

 DuPont’s takeover of Conoco. Ruback (1982) assessed the net value creation to the shareholders of the buyer and target jointly. Whereas shareholders of the target (Conoco) received gains of $3.2 billion, shareholders of DuPont sustained losses of $800 million. Therefore, the net value created in the deal was $2.4 billion. Ruback explored various possible explanations for the net gain and was unable to identify a specific source. The study highlights the difficulty facing all researchers in explaining wealth creation or destruction in individual deals.

Clinical studies illuminate possible drivers of returns from acquisition. These and other studies have emphasized the role of strategic, financial, and organizational issues.