Consolidation Combinations

Research evidence excerpt

Consolidation Combinations

Global Foundation

July 20, 2026 09:00 PM GMT

Morgan Stanley & Co. International plc+MBuilding & Construction Cedar Ekblom, CFA

Equity Analyst

Consolidation Combinations Cedar.Ekblom@morganstanley.comDaniel Khajenouri +44 20 7425-4623

Daniel.Khajenouri@morganstanley.com +44 20 7425-3065

Large M&A activity has picked up. We use a matrix to assess 930 Morgan Stanley México, Casa de Bolsa, S.A. de C.V.+

hypothetical pairs. We conclude that transformational deals Alejandra Obregon

which preserve balance sheet flexibility and meet a hurdle of EquityAlejandra.Obregon@morganstanley.comAnalyst +52 55 5282-6732

being EPS accretive are the exception. We prefer bolt-ons. Morgan Stanley & Co. LLC

Angel Castillo

Key Takeaways Equity Analyst

Angel.Castillo@morganstanley.com +1 212 761-1931

The burden on M&A to supplement modest top line organic growth has risen.

Morgan Stanley Australia Limited+

Announced and rumoured M&A has increased. Some recent deals are a departure Joseph Michael, CFA

from usual bolt-ons. Equity Analyst

Joseph.Michael@morganstanley.com +61 2 9770-9225

We explore the trade-off between preserving balance sheet flexibility (i.e. using

Morgan Stanley C.T.V.M. S.A.+

equity to finance a combination) and potential earnings accretion.

Mario Simplicio

When financed with 100% debt, only 17% of combinations are EPS accretive and Research Associate

Mario.Simplicio@morganstanley.com +55 11 3048-6211

deliver ND/EBITDA <2.5x. Shifting to 50% debt / 50% equity lifts this to 30%.

Morgan Stanley & Co. LLC

Analysing historical deals show synergies can be material; median synergies Esther O Osinaiya

represent 6% of Target revenue, and 33% of pre-synergy target EBITDA. Research Associate

Esther.Osinaiya@morganstanley.com +1 212 761-3176