MT Masterclass: Mergers and acquisitions

M&A is back, and there are bargains to be had - if you can get your hands on the cash.

by
Last Updated: 31 Aug 2010

What is it?
It's a jungle out there. Kill or be killed. This is the iron law of business. Get big or die trying: merge, acquire or lose out. Every company has its price, and if you can afford it, a deal can be done. But not before a PR battle gets played out. When one side claims: 'This is a merger of equals, not an acquisition,' don't believe it. Someone will be on top. 'No-one, not even the CEO of the firm, can control the changes taking place once an acquisition or merger is announced,' says Cass Business School's M&A research centre director Scott Moeller.

Where did it come from?
There have only ever been two ways for a company to grow - 'organically', that is, by winning a greater share of a market through its own efforts, or through mergers or acquisitions. M&A is quicker and seemingly easier than getting better at what you do, but also fraught with difficulty. But deals remain popular - when there's cash to finance them. They are the preferred route for corporate empire-builders. The names of modern firms can betray the extent to which they are the product of deals. For example, GlaxoSmithKline is made up of at least four major drugs companies.

Where is it going?
M&A is back. The US food giant Kraft is looking to sink its powerful jaws into Britain's favourite chocolate-maker Cadbury. And, a few weeks ago, Walt Disney bought Marvel Entertainment for $4bn. PE group SilverLake Partners is looking to snap up the online comms firm Skype for $2.75bn. Before stock markets rise any further, acquisitive companies - those with some cash, anyway - will surely look to grab some tasty bargains. The only thing preventing an outbreak of genuine merger mania is the wobbly state of the financial markets. Would you fancy your chances of securing a mega-loan right now?

Fad quotient (out of 10): Rising fast at 8.

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