What 30 Years of M&A Research Says About the Deals Being Done Right Now

Good morning. March CPI landed this morning. You've probably seen the number by now, and everyone with a Bloomberg terminal is already arguing about what it means for the Fed. I want to do something different this week: step back from the daily noise and look at what the academic research actually tells us about how companies are deploying capital right now. Because the patterns we're seeing in 2026 have been studied extensively, and the findings aren't comforting.

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THE RESEARCH

What 30 Years of M&A Research Says About the Deals Being Done Right Now

Q1 2026 produced a record 12 megadeals over $10 billion. Three companies alone, Salesforce, Walmart, and Verizon, authorized a combined $105 billion in buybacks in February. Paramount is taking on $49 billion in debt to merge with Warner Bros. Discovery. And Intel is borrowing $6.5 billion to buy back its own stock.

That's a lot of capital moving at once. Academic researchers have spent decades studying exactly these kinds of waves, and what they've found should give every board member and portfolio manager some pause.

Finding #1: Most acquisitions don't create value for the buyer. Acquirer announcement returns are typically zero or slightly negative (Moeller, Schlingemann & Stulz, 2004). Target shareholders capture the bulk of the gains through premiums. A review across multiple decades found that acquirer abnormal returns are "often close to zero or indistinguishable from zero" (Netter, Stegemoller & Wintoki, 2011, cited in Böni, Kroencke & Vasvari, 2025). This has been documented so many times, across so many sample periods, that it's practically settled science. The deals that do create acquirer value share a specific set of characteristics.

Finding #2: The deals that work are bolt-ons. Fich, Nguyen & Officer (2018) examined over 10,000 completed M&A transactions and found that large value-creating deals are "almost as frequent as deals responsible for large losses." The key predictor: relative size. The best-performing acquisitions were small relative to the acquirer. Capital One's $5.15 billion acquisition of Brex, roughly 7% of its market cap, fits this profile. Paramount's $110 billion acquisition of Warner Bros. Discovery does not.

Finding #3: Deals done during merger waves underperform. Hillier, McColgan & Tsekeris (2019) found that acquirers during merger waves experience "significant long-term underperformance" compared to those who act outside of waves. Duchin & Schmidt confirmed it. Out-of-wave mergers increase long-run value. In-wave mergers, particularly late in a wave, tend to destroy it. Q1 2026 set records for megadeal volume. We may be closer to late in this cycle than anyone wants to admit.

Finding #4: Debt-financed deals increase default risk. Bruyland & de Maeseneire (2016) found that acquirer default risk rises after acquisitions, driven primarily by increased post-deal leverage. Furfine & Rosen linked it to aggressive managerial actions: mergers carry more risk when CEOs have large option-based compensation or when recent stock performance has been poor. Murray et al. confirmed that when deal financing increases leverage, the bidder's default risk goes up. Paramount's post-merger entity will carry roughly $80 billion in net debt against about $3 billion in annual free cash flow. That's 26x leverage. The median investment-grade company runs at 2x to 3x.

Finding #5: When financing gets tight, deals get better. Cleary & Hossain (2020) studied M&A performance before and after the 2008 financial crisis. Post-crisis acquisitions were "significantly more value enhancing" in both the short and long term. Tighter financing constraints filtered out weaker acquirers and forced better discipline. Only well-capitalized buyers with genuine strategic rationale could get deals done. If the Iran war and inflation keep the cost of capital elevated through 2026, the deals that do get completed should be better on average. The risk is that we're still in the window where capital is available enough to let marginal deals through.

Finding #6: Markets value organic investment more than acquisitions. Jones, Li & Adamolekun (2022) analyzed 4,256 corporate investment announcements and found that stock market reactions to new product launches and R&D spending were consistently higher than reactions to M&A announcements. Organic investment has longer time horizons and fewer agency conflicts, and investors price that in. Three companies dropped $105 billion into buybacks in a single month. Meanwhile, the companies that spent that money on R&D and new products saw stronger market reactions, on average, than the ones that went shopping for acquisitions.

Finding #7: Buybacks reduce long-term investment. Almeida et al. (2016) studied US companies between 1988 and 2010 and confirmed that firms conducting share repurchases subsequently reduce employment, capital spending, and R&D. A separate study found a 10% decrease in R&D investment following buyback programs (Talbot, 2024, citing Bretell et al., 2015). The "Great Re-leveraging" trend, where companies borrow to fund buybacks, is a bet that the stock is undervalued. It's also a choice to return capital rather than invest it. The research says those two things pull in opposite directions over time.

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WHAT THIS MEANS FOR THE DEALS WE'RE WATCHING

Capital One / Brex ($5.15B): Bolt-on deal. Small relative to the acquirer. Cash-heavy financing. Fits the profile Fich et al. (2018) identified as value-creating. If you were going to design an acquisition that checks the right boxes, this is close to what it looks like.

Paramount / WBD ($110B): Transformational deal. 26x leverage on cash flow. Mixed IG and junk debt. Executed during a record megadeal wave. The research on every one of these characteristics, independently, predicts underperformance. Combined, I'm not sure the academic literature has a precedent for a deal that checks this many negative boxes at once.

Intel's $15B buyback funded with $6.5B in new debt: Intel's foundry strategy needs massive sustained capital spending for years. Whether that spending survives alongside a $15 billion buyback program is the question the board needs to answer, and the Almeida et al. research suggests they're pulling in opposite directions.

Eli Lilly / Centessa ($6.3B + $1.5B CVRs): Bolt-on deal with contingent consideration. Lilly only pays the full $7.8 billion if the clinical milestones actually hit. Battauz, Gatti, Prencipe & Viarengo (2021) have studied earnout structures and note they carry counterparty default risk, but Lilly's balance sheet makes that a non-issue. The CVR structure does what good deal design should do: it allocates risk to the party best positioned to bear it.

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THE FRAMEWORK

Michael Mauboussin, in a 2025 capital deployment roundtable published in the Journal of Applied Corporate Finance, put it simply: "Intrinsic value per share should be the lens that is used to evaluate all forms of capital deployment, including dividends and share repurchases as well as acquisitions." And: "The right investment and financing strategy varies with time and circumstances."

That second point is the one most boards skip. A buyback at 10x earnings is different from a buyback at 40x earnings. An acquisition during a period of tight capital is different from one during a liquidity flood. Debt financing at 3.5% is different from debt financing at 5.5%. The strategy has to change when the environment changes.

If I had to distill the research down to five things that hold up across every cycle I've read:

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ONE MORE THING

The Number That Should Be on Every Board Deck

The Fed's longer-run neutral rate estimate quietly climbed to 3.125% in March. A year ago it was 2.75%. This is the rate the Fed thinks is neither stimulative nor restrictive over time.

When neutral was 2.75%, a deal financed at 5% had a 225-basis-point cushion above neutral. At 3.125%, that cushion shrinks. At 3.5%, which some FOMC members now see as realistic, the math on leveraged deals, buyback financing, and capital projects changes materially.

If your models still assume rates are going back to 2019 levels, now is the time to update them. The floor is closer to 3.5% than 2%, and every capital allocation decision should be underwritten accordingly.

Have a good Friday.

— Marques

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Marques Blank is the founder of Blank Capital (fractional CFO and FP&A advisory) and Blank Capital Partners (registered investment advisory). Former Northrop Grumman ($1.6B business unit) and Citibank (securitized credit). CMA, MBA, Series 65.

This newsletter is for informational purposes only and does not constitute investment advice. Academic citations: Fich, Nguyen & Officer (2018), Financial Management; Cleary & Hossain (2020), Journal of Financial Research; Hillier, McColgan & Tsekeris (2019), Journal of Business Finance & Accounting; Bruyland & de Maeseneire (2016), Journal of Business Finance & Accounting; Jones, Li & Adamolekun (2022), Abacus; Clancy, Mauboussin et al. (2025), Journal of Applied Corporate Finance; Battauz, Gatti et al. (2021), European Financial Management; Talbot (2024), Journal of Law and Society.