Investment Bankers Getting Antsy; Need To Push For Internet Mergers

from the and-then-we'll-break-'em-up dept

It looks like tech investment bankers aren’t bringing in enough money these days. Even with Vonage’s IPO, the tech IPO market is still pretty dead for a variety of reasons (with Sarbanes-Oxley taking a lot of the blame). So what’s a tech investment banker to do? Move on to their other area of business: convincing companies to buy each other up so they can be broken up again later. It’s how the process works. The bankers suddenly start talking about competitive pressures and synergies, and convince companies that they need to merge. Then, once they become big conglomerates, the bankers start complaining that, due to the multiple lines of business, certain areas aren’t being valued correctly and need to be spun out (forgetting everything they said about synergies and competitive pressures before). Apparently, we’re in the stage where it’s all about synergies and competitive pressures when it comes to internet businesses. Last month there were random rumors that eBay and Yahoo might team up or that Microsoft might team with either Yahoo or eBay to take on Google. Most dismissed the concept as idle chatter during a slow news cycle. Today, however, both stories have been given new life, thanks to an analyst at JP Morgan analyzing why such deals might make sense, focusing in on (you guessed it) synergies and competitive pressures from Google. If the talk keeps up, sooner or later, someone may act on it… and then it’ll only be a few months before we start hearing rumors, backed up with analyst reports, about why the new eBayhooSoft needs to spin off various businesses to help realize the true value of their IM platforms, or something silly like that. As long as the investment bankers keep collecting their fees…

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Comments on “Investment Bankers Getting Antsy; Need To Push For Internet Mergers”

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dorpus says:

Feed the crows!

An eerie similarity to a story I just read —

The “panawave” religious cult, the people who wear antennas on their head to receive positive vibes from their cult leader, have been feeding vast numbers of crows with bird feed, and the city is being overrun with thousands of crows. The local hunting club shot down 7 of the crows over the weekend, but the crows continue to grow. Neighbors complain they cannot sleep from the gaggles of crows who invade their back yards and eat up anything planted.

charlieahern says:

Deals on Commission

Since the bankers only get paid a commission when there’s a transaction (think; car salesmen loitering around the showroom), they have to drum up transactions. And if they can get a couple of hyper competititve CEO egos to bid against each other…the commissions become irrational.

The bankers could care less whether the shareholders are better off in the longer term, and the affected employees and communities are of even less concern. I haven’t checked the research lately, but remember reading a paper to the effect that even after the difficult ‘integration’ period the market value of two merged firms was significantly below the probable value of two independent firms.

Since 1/2/04 Oracle’s stock has gone up about $0.65 per share or about 5%, despite the acquisitions of Peoplesoft and Seibel. In the same period the boring ol’ S&P 500 is up about 10%.

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