When Big Deals Go Badand Why

Amid a flurry of bad news for big deals, it bears remembering that successful mergers heed the basic rules of business
AOL Chairman and CEO Steve Case (left) and Time Warner Chairman and CEO Gerald Levin at the New York news conference announcing the AOL Time Warner deal on Jan. 10, 2000. Rick Maiman/Bloomberg News

The greatest business successes are often engineered by bold visionaries who altered industries: Think Microsoft (MSFT), Berkshire Hathaway (BRKB), and Southwest Airlines (LUV). Unfortunately, when that type of grand thinking is applied to the mergers-and-acquisitions arena, disaster often ensues. Multibillion-dollar deals are based on personal relationships and egos, grandiose plans for so-called transformational changes to an industry, and a sense that the new sum will be far greater than all the previous parts. And, of course, the path for much of the wheeling and dealing is well lubricated by fee-hunting bankers and lawyers.

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