White House Chronicle

News Analysis With a Sense of Humor

  • Home
  • King’s Commentaries
  • Random Features
  • Photos
  • Public Speaker
  • WHC Episodes
  • About WHC
  • Carrying Stations
  • ME/CFS Alert
  • Contact Us

The Merger Industry Is Doing Just Fine

July 21, 2014 by White House Chronicle Leave a Comment

Whether Rupert Murdoch’s 20th Century Fox succeeds in its $80 billion bid for Time Warner, rest assured the mergers and acquisitions (M&A) industry will do just fine. Very fine, actually.

There is such a thing as the M&A industry, but it is elusive. It has no trade association and cannot be looked up in the telephone directory. But this virtual organization is a power in the land and very, very rich.

It is made up of investment bankers, lawyers, economists, advertising agencies, public relations tacticians, lobbyists and legal printing firms. They all swing into action like sharks alerted by blood in the water. They are a diverse crew with one thing in common: They do not come cheap.

At the top of the pinnacle are the investment bankers and their pals in the hedge-fund world, who are ready with ideas and capital if it is needed; ready to reap the rewards of arbitrage. These are the elite officers of the Wall Street Brigades; money is their North Star. They have been bred, in the best schools, to expect it as their entitlement, and they are keen to live up to that expectation.

They are retained by both sides in a hostile takeover and, however it goes, their fees will be enough on one transaction to keep them on Easy Street for years. They fly high, shoot high and live high. They are aristocrats in the kingdom of money.

Just below them come the lawyers, droves of them each offering advice on some aspect of the challenge. Each billing more for one hour than most people earn in a week. When working on a big merger, where there are billions and billions of dollars in play, the legal fees run into the tens of millions of dollars — and nobody cares. Outside of the senior management, who expect to get extraordinary wealthy — hundreds of millions of dollars, at least — in a takeover, it is the bankers and the lawyers, denizens of Fifth Avenue and the Hamptons, who make out beyond normal dreams of avarice, and do it over and over.

So it is not surprising that it is often bankers who instigate mergers either by pushing the ideas and the finance mechanism on the firm that hopes to be the acquirer, or persuading a firm that it is time to put itself on the market. Once a target is “in play,” as Time Warner is, anything can happen: A white-knight suitor can come along or the vulnerable company can become an acquisition, as in the way Men’s Warehouse stitched up Jos. A. Bank.

If there is a hostile battle, the advertising and public relations people come in, cajoling shareholders to hold out or sell out. More millions are spent in this effort: No one is trying to save money when the transactions are so large.

The biggest winners are those at the top of the heap: the managements. They own stock options and shares, plus special deals are written to sweeten things for them.

Everyone engaged in the M&A industry makes money when the game is on, all the way down to the caterers, who provide the sustenance when the midnight oil is burning. A merger is a grueling and fun undertaking; the fun of making money under pressure, a lot of pressure and even more money.

Who loses? Certainly the staff of the lesser-partner firm. The conqueror calls the shots and decrees the layoffs, which are one of the principal savings or “efficiencies” of the takeover. There will be less duplication, fewer subsidiary businesses, and fewer facilities that can be consolidated.

The other loser, feverishly denied in advance of the nuptials, is the consumer; the poor stiff who purchases the goods and services that the new entity offers. These may be fewer and, almost certainly, they will become more expensive over time.

Not all mergers are bad. Actually, Rupert Murdoch’s takeover of The Wall Street Journal has resulted in an invigorated newspaper.

But anyone, including myself, who has flown on the merged American Airlines and U.S. Airways has nothing good to report about service, pricing, or frequency. I’ll venture that the M&A moguls are taking private jets — wouldn’t you? — For the Hearst-New York Times Syndicate

— 

Filed Under: King's Commentaries Tagged With: 20th Century Fox, American Airlines, Jos. A. Bank, M&A industry, Men's Warehouse, mergers and acquisitions, Rupert Murdoch, The Wall Street Journal, Time Warner, U.S. Airways

White House Chronicle on Social

  • Facebook
  • Twitter
  • Vimeo
  • YouTube
The Long Necktie Is Dead, Long Live the Bow Tie

The Long Necktie Is Dead, Long Live the Bow Tie

Llewellyn King

From time to time, I feel it necessary to report on the necktie wars. Sadly, the news is dismal. Neckties are in retreat, and in many instances, they have disappeared.  Father’s Day this month is already causing stress. The rule was always when in doubt, give a necktie. Certain to please. But if you give […]

Artificial Intelligence — the Greatest Disruptor Ever?

Artificial Intelligence — the Greatest Disruptor Ever?

Llewellyn King

To rephrase Leon Trotsky: You may not be interested in artificial intelligence, but artificial intelligence is interested in you. Suddenly, long-rumored and awaited, AI is upon the world—a world that isn’t ready for the massive and forever disruption it threatens. AI could be the greatest disruptor in history, surpassing the arrival of the printing press, […]

How the World Can Invest in a Green Future That Works

How the World Can Invest in a Green Future That Works

Llewellyn King

Adam Smith, the great Scottish economist and moral philosopher, didn’t have to confront the environmental crisis, the healthcare delivery challenge or any of today’s issues. But his economic theory and moral philosophy — his unseen hand — are as pertinent today as they were in his lifetime. Notably, Smith believed market forces were a force […]

I Go to the Oracle, Seeking Better Political News

I Go to the Oracle, Seeking Better Political News

Llewellyn King

When the ancient Greeks wanted to learn what their future held, they would consult with oracles. Alexander the Great, for one, visited the Oracle at Siwa, an oasis in the Egyptian desert. According to his biographer, Plutarch, the oracle told Alexander that he was destined to conquer the world. In these tumultuous days when we, […]

Copyright © 2023 · White House Chronicle Theme on Genesis Framework · WordPress · Log in