Warner on merger motivations and shareholder value

This is a cross posting from Jim over at Business Studies. There is much overlap between A2 business economics and the focus on strategy for BUSS 4. The Kraft-Cadbury takeover bid provide rich pickings.

Jeremy Warner (formerly of the Independent) is well worth reading in the Telegraph each day.  And he has written a timely piece on the likely result of Kraft / Cadbury takeover.  Who are the likely winners from the deal? Nestle & Mars (who will probably gain market share as Cadbury struggles to come to terms with the new culture of Kraft) and the investment bankers and lawyers who have billed many millions of fees from the prolonged takeover battle.

There are some great quotes in Warners article.

I particularly liked this one:

“Most mega mergers are more the result of executive boredom, delusions of grandeur and the siren call of fee hungry investment bankers than compelling industrial logic”

Warner goes on to list some good examples for students of major acquisitions (often dressed up as “mergers”) which have gone on to destroy huge amounts of shareholder value.  Well worth reading and possibly printing out for students to use at the start of a lesson on external growth strategy

Oxbridge Economics: Introduction to Game Theory [21 May 2012]
Unit 3 Micro: Game Theory and Business Economics [21 May 2012]
Unit 3 Micro: The Dawn of a Shareholder Spring? [8 May 2012]
Unit 1 Micro: Using the Cost-Benefit Principle [30 Apr 2012]
Unit 3 Micro: Revision on Takeovers and Mergers [3 Apr 2012]
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Unit 2 Macro: Focus on UK Manufacturing [6 Mar 2012]
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A2 Micro: Examples of Price Discrimination [19 May 2011]
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