Great M&A opportunities

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Can’t always tell if some insight has subtle power or is just stating the blindingly obvious? Me neither.  BCG says Seize M&A opportunities while they last and presents the usual financial ratio research to prove that acquisitions in a downturn generate better returns than those made in the upturn.

Why is this surprising – when targets’ values in the upturn will inevitably reflect the underlying growth, to which an acquiror has to add for the deal to generate value? Still, even if obvious, ...

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Analysts press for underinvestment

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I have noted before that stock analysts need know little about how strategy affects firm performance, so an academic study on the impact of stock analysts on firms’ investment behaviour is intriguing. The unpublished working paper by Benner and Ranganathan at Wharton finds that negative pressures from analysts to improve cash flow and stock price trigger reductions in strategic investments during periods of technological change. Two examples:

  • One analyst continually pressured Kodak to cut costs and investment in digital technology: “…we suspect ...
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