Measuring the value that mergers and acquisitions create is an inexact science. Typical analyses compare share prices before and after a deal is announced, using short-term investor reactions to indicate how much value it would be likely to create. One benefit of this approach is that it provides a measure of expected value unaffected by other variables, such as subsequent acquisitions or changes in leadership.

Yet relying on market reactions to gauge value creation has drawbacks. It skews the results to larger deals, which have the heft to affect share prices, and underrepresents smaller ones—even though they account for a majority of M&A. It can also underestimate the amount of value created by multideal strategies whose real worth develops over the longer term. Researchers also frequently collapse their data into a single average for the purpose of generalization. That obscures important differences between industries and M&A strategies.