by Joseph Weisenthal

M&A Mania Just A Sign Of The Times

from the it's-a-party dept

With so much talk about M&A these days, it's worth analyzing the conditions that are fostering this situation. It's not an easy question, since current market conditions aren't that different than they were a year ago, when there were a lot fewer deals. The Wall Street Journal tries to suss out a few reasons, including the continuing low interest rate environment (although they were lower a year ago), and a lack of regulatory obstructions -- there's a widespread sense that the DOJ has been rendered powerless to stop mergers ever since it failed to block Oracle's purchase of PeopleSoft. Still, these reasons don't seem robust enough to fully explain the spate of real or imagined dealmaking. The simplest answer may come from looking at the stock market. Take a look at what happened last Friday when rumor spread that Microsoft might buy Yahoo. While Yahoo's stock surged, Microsoft's stock barely dipped. In normal market conditions, you'd expect the announcement of a very risky, desperate-looking $50 billion acquisition to hit the acquiring company hard. The fact that it didn't suggests an unusually high amount of optimism. The fact that markets around the world are all pushing new records confirms that optimism is indeed widespread. So perhaps all of these deals aren't reflective of any significant economic shifts, but rather a lot of confidence than any investment, no matter how risky, will ultimately work out.

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  • identicon
    RandomThoughts, 8 May 2007 @ 8:49am

    Microsoft buying Yahoo isn't all that risky, Microsoft needs to get into the advertising business and Yahoo fits well there. One issue would be Yahoo's arrangement with (AT&T/SBC) and how would that play out?

    reply to this | link to this | view in chronology ]

  • identicon
    R. Titus, 8 May 2007 @ 11:39am

    M&A Mania

    At the end of a big growth cycle there is always an increase in M&A activity as the cash-rich old guard, if they are smart and quick, buy their way back into relevancy through quick strategic M&A. More importantly, with the buzz in tech coming back, those with $$$ are worried that prices will go up as the economy improves and/or in case a bubble 2.0 develops. Better to buy now, especially if it's accretive.

    Microsoft, missed the boat with the Internet and specifically the portal business. Frankly have not had the success with MSN which they should have (failing to ever really capitalize on being the default setting on their browser.) RandomThought is also correct; they do not have a really successful ad business yet.

    But what this is really about is the next generation desktop, which will be distributed via browser. Google has it, Sun has it, Yahoo + Microsoft might have it; though neither has really succeeded in developing this separately.

    The days of the dominance and importance of the OS are waning and MSOFT needs to protect its flank.

    reply to this | link to this | view in chronology ]

  • identicon
    Papafox, 8 May 2007 @ 12:34pm

    Podcast covering history of Private Equity/LBO

    Recently Private Equity, or LBO as it used to be known, has become prominent again. There is an interesting podcast covering the history and reasons for the resurgence, which has a number of interview which expand on why M&A activity is increasing and why Private Equity is popular again.

    reply to this | link to this | view in chronology ]

  • identicon
    sam, 8 May 2007 @ 12:55pm


    anything i do.. no matter how financially risky.. can work!!

    umm.. can you say bubble!

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 9 May 2007 @ 4:40pm

    M&A Mania Just A Sign Of The business driven republican administration. Oracle and Peoplesoft is a good example.

    Maybe the mania is driven by the possibility of a change in regulatory climate in the near future.

    reply to this | link to this | view in chronology ]

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