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Tag >> mergers
We in the financial press are often guilty of overzealousness in our trend-spotting attempts. And we can be just as guilty of overanalyzing -- and under-analyzing -- the tealeaves laid out by those trends.
The Wall Street Journal on Thursday ran a story with a lead of "One year removed from the trough of the recession, American corporations continue to hoard more cash than ever. There are now tentative signs that they are finally comfortable using the money to do some shopping."
I'm just as eager as anyone to see a strong economic turnaround and certainly an uptick in deal-making is a sign that companies are more confident. But pointing to an increase in all-cash deals does not signify companies are at all willing to dip into their cash piles.
I've lost count of the attempts on the part of Alcon investors to get drug maker Novartis to up its bid for its fellow Swiss company before closing. But here's the latest.
The thing is, as we pointed out a week and a half ago, Swiss courts allow minority investors to challenge deals only after they're completed. So why in the world would Novartis offer more now?
The article acknowledges that near the end, as did much of the earlier coverage of this takeover non-battle. But why then does the press keep wasting space on complaints that are likely to go nowhere and are thus a non-story?
This story about Novartis' proposed deal for Alcon creates the impression that the tax consequences for US investors could be a big enough roadblock completion as to require management to raise its bid.
But even the expert on whose analysis the story relies doubts that will be the case.
The debate over the benefits of big banks continued on Monday in the wake of Ben Bernanke's latest assertion.
After a speech last Friday, Bernanke replied to a question about breaking up banks that are too fail by saying, "My own initial take on this is that we can address these issues in a way that doesn't destroy the economic value of large, complex, multifunction firms."
This Page One story really takes the cake for economic head-scratchers from the Times.
First, there's no explanation as to why Xerox's shares fell 14 percent on the news of its proposed deal with Affiliated Computer Services. Too complicated? True, it is isn't easy to figure out exactly how much dilution will arise from the deal, but by my estimate, fully 70 percent of the deal would be financed with Xerox stock. No wonder its value fell from $6.4 billion to $5.5 billion in a day.
With Xerox offering to pay a healthy premium for Affiliated Computer Services just a week after Dell announced its acquisition of Perot Systems, investors and customers alike will have to hope that competition in back-office outsourcing will be healthy for profits as well as service.
But those of Xerox have a reason for skepticism here. The company is anything but new to the computer business, and its history isn't at all reassuring.
The merger police are back on the beat.
Christine Varney, the assistant attorney general in charge of the antitrust division at the Justice Department, said as much not long after President Obama was inaugurated.
The Justice Department and Federal Trade Commission are thinking about finally updating their 17-year-old guidelines on how they determine if a merger is anticompetitive.
"It is an appropriate time for the antitrust agencies to conduct a review of the guidelines to determine whether any revisions should be made to better protect American consumers and businesses from anticompetitive mergers," Christine Varney, the Justice Department's top antitrust official, said in a written statement on Tuesday.
The review would aim to clarify how the regulators currently look at proposed tie-ups. One change to the guidelines could be a de-emphasis of an analysis of the effect the merger would have on combined markets, which the agencies don't really use anyway, the Wall Street Journal reported. (Maybe Econ 101 classes can stop teaching students how to calculate the Herfindahl-Hirschman Index.)
It only takes a few multibillion-dollar deals to get everyone fired up about an M&A renaissance. Actually, it's only taken Kraft's hostile bid for Cadbury and Dell's deal for Perot Systems.
Bloomberg tells us on Monday that "Never before have U.S. companies piled up cash faster compared with interest costs than they are now, setting the stage for a surge in mergers and acquisitions."
It's no mystery that companies have been hoarding cash as the economy has tanked, strategically raising debt and cutting expenses. And they've done a good job of it. Commerce Department data showed that corporate cash flow exceeded $1.5 trillion on an annualized basis in each of the last three quarters, Bloomberg reported.
When you save a major financial institution from completely falling on its face, you'd expect a little gratitude, right?
Well, Bank of America found out this week that's not how its deal for Merrill Lynch is being viewed. At least not by the judicial system.
The deal for Mother Merrill was supposed to be a crowning achievement for B of A CEO Ken Lewis and the bank's board of directors.
But, hey, if they still feel that way, they're lucky, because it looks like they're going to relive the entire episode in excruciating detail.
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