The age-old acquisition question.

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I see Wrigley, of chewing-gum and mints fame, accepted a $23 billion takeover from Mars, which includes Snickers, M&M’s and Uncle Ben’s rice among its brands, making it the world’s biggest confectioner. Strange then how we keep being told that take-overs are mostly a bad idea for the acquiring company, with all the benefits [or more than all!] going to the shareholders of the company that is bought out. Don’t see how that could be true, or we would today have hundreds of small companies in pharma, media, consumer goods, electronics etc. that in total delivered more value than the large and powerful corporations we actually see today. This deal was backed by Warren Buffett – not noted for dumb investment decisions.

Investors in Hewlett-Packard clearly believe the advice, though .. when it agreed to buy Electronic Data Systems for $13.9bn, its stock price fell 10%, knocking $12bn off its value! Perhaps HP were unduly impressed by IBM’s success from developing a broad range of computer services, rather than flogging boxes. That’s not to say HP+EDS is bound to succeed – a lot rides on not only a successful marriage, but growing a healthy family afterwards.

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