Above Header Navigation

Strategic Finance? 7 Deadly Sins infect merger boom!

How many times have we heard about a failed marriage, scuttled by pride … greed … jealousy … envy … or other misdeeds flowing from the interminably deep well of human shortcomings? Too many, I’m sure, but those denizens of the 7 Deadly Sins brigade also besiege the world of mergers and acquisitions.

I haven’t written about this enough, I realize, as I read the M&A Losers in $10 Trillion Deal Binge …. providing yet one more example of the failed mergers that incite shareholder rebellions. We know the road to hell is paved with good intentions, so that doesn’t count for much. We expect CEOs and their directors to exercise their fiduciary responsibility to US by making sound decisions that are not scuttled by some array of the 7 Deadly Sins.

When you rummage around in the dumpster of failed deals, it won’t be easy to find one whose failures aren’t rooted in the garden of the 7 Deadly Sins.

Studies have shown time and again that deals usually don’t pay off for acquirers. Here are three more troubling findings from Bloomberg’s ranking group relating to the $10 trillion merger boom that began at the end of 2007:

  1. Deals executed during a financial boom tend to turn out worse than those done in a slump.
  2. The stocks of 53 companies that made the biggest purchases from 2005 to 2008 lagged behind industry peers two years later.
  3. The average stock price of all the top acquirers trailed benchmark indexes by an average of about 3 percentage points.

P.S. McClatchy Co., the Sacramento newspaper ranked the worst of the 100 on Bloomberg’s list.

Pride is usually considered the mother of all sins, and misplaced pride and envy have scuttled many a merger that shouldn’t have been made in the first place. The Sinful Excesses of Greed & Gluttony also contribute to these failed marriages.

When you rummage around in the dumpster of failed deals, it won’t be easy to find one whose failures aren’t rooted in the garden of the 7 Deadly Sins.

1 Comment

, , , , , ,

We respect your email privacy