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Home > Blog > Look Out Below
Out of Our Minds
Wednesday, February 02, 2005 4:26 PM
Look Out Below
Kevin Salwen on Business

Some fascinating info in the latest Time magazine about the stock market's reaction post-mega-merger.

'Blockbuster mergers tend to be duds for stockholders of the acquiring company. In seven of the nine mergers valued at more than $50 billion, the acquirer's share price is down an average of 46% from premerger levels, according to FactSet Mergerstat, a research firm in Santa Monica, Calif. Maybe you already knew that if you're a longtime owner of Hewlett-Packard, whose stock has flatlined since the company acquired Compaq in 2002. AOL's merger with Time Warner may have set a new standard of paired futility, erasing some 80% of the merged company's stock value. After the hype subsides, more often than not, investors wind up with tax write-offs.'

Fascinating stuff, especially in light of P&G's planned acquisition of Gillette for -- you guessed it -- $57 billion. If you're a P&G shareholder, you might consider a money-market fund.

(Thanks to Tom Peters for the link.)


2 comments

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lee - 2/3/2005 8:58:36 PM
think about it. You never know everything about what you buy, be it either a new car or a company. The buyer is always optimistic -- hey -- you have to keep your stock up. You can never say 'Gee, our outlook is rocky so we are buying Company X and hoping that stuff works out.' It is almost a given that there is a period of disappointment. The exception, of course, is a fairly simple business which has been mismanaged. Even then, there is an adjustment period. During bullmarkets, shareholders believe the tale of synergy (as we will believe most anything in a bull market).....

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