Is Merger Mania Good or Bad for Investors?

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June 23 (Bloomberg) -- Kleinberg Kaplan Head of M&A Christopher Davis and Sullivan & Cromwell Senior M&A Partner Frank Aquila examine the Oracle-Micros and General Electric-Alstom deals. They speak with Trish Regan, Jeffrey McCracken, and Jonathan Ferro on “Street Smart.” (Source: Bloomberg)


To answer that question, our panel.

Good to see all of you.

Do you think ultimately this is good for shareholders and the economy?

I think it is good for the economy.

There has been a hold back and re-seniors with limited mna.

Some predict this will be the great year for to come back.

When you look at deal volume, the value of the deals and how much of it is hostile.

Lots of momentum.

We talk about it on a regular basis, every monday morning.

Sunday night you are hard at work to be met news out for monday morning.

What is notable is that in the case of oracle they are trying to buy growth.

What was emphasized to us is that it has been 11 straight quarters where oracle has underperformed in terms of revenue or sales.

I think the ceos have gotten around the idea of 1% or 2% sales growth.

A lot of people are using their shares now, they realize they are highly valued and it is a great commodity.

The point is that they're able to do these deals and they're often being rewarded in the marketplace.

Earnings might look better in, many are creative.

But are they doing enough to help the overall economy?

All of these deals happening all of a sudden?

I do not know if they are doing enough for the economy, is the economy doing enough to fuel the m&a boom?

The reality is are they doing enough to fuel long-term shareholder growth?

I think the deals you were needing to see our deals that work in the medium-term and that is why the stock prices are going up.

Most cases you're seeing d eals buildup for the longer-term.

These are deals that were thought about last year of the year before enough and come back to.

They are not doing it on a whim.

Ohio state done a massive investigation between 1998 and 2001, and every dollar spent in acquisition, $.12 was lost to the shareholder.

Why is it happening?

I see two big tailwinds.

What a shareholder activism, and the other is tax efficiencies.

We are seeing monster deals, and the potential for them to be more tax efficient, is that really strategic, about giving more out of the industry vary in i think you have to question that.

-- the industry they are in?

I think you have to question that.

You have to look at the financial model.

The deals are being done for strategic agrees and -- reasons.

I think you really have to question some of these academic studies because when you look at some of the particular deals, the numbers do not add up.

They do add up in a mathematical them a statistical standpoint, but they do not look at what would that acquiring company look like if they had not done the deal?

About $135 billion in the market, because they had seen these companies as negative.

Two companies combine, and typically jobs are lost.

On the one hand, it should make our economy more vibrant, more competitive.

More nimble.

But on the other hand you have the temporary loss of those jobs which is a challenge.

Would you can never prove, which is what would happen if they had not pursued a deal.

As our analyst was alluding to earlier, oracle has been a serial acquirer, but they have not done deals recently and they're stumbling for growth.

They may have missed out on opportunities in the last few years that they should ha ve done.

Ge was pushed into the situation really had to get in bed with the french government.

What we're noting from these deals at their taking longer and longer to close.

And the market is grinding higher.

They have missed out on the rally.

Ge already had exposure to france.

What it got out of this was the gas turbine business.

They did have to give away a piece of the trail business, and to do the steam turbines for a couple other things, but i think there is a big upside there aside from really were downs to his personal reputation.

He pulled this off with the players he had to deal with.

I think that is good for him.

I think there is a difference between long-term impact of acquisitions, and long-term impact of activism.

Activism is positive for shareholders and in the positive and medium-term.

Keeps management on its toes.

This text has been automatically generated. It may not be 100% accurate.


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