Thursday, May 26, 2005

Merger Synergy..........truth or an oxymoron

An article in today's New York Times (You may have to register and login - its free for you cheapos) sheds some "light" on the world of corporate M&A, and why despite historically horrific returns and absense of cost savings, why CEO's may keep at it.

While the article is the summary of an academic research paper and probably misses a few point here and there about the psychology of greed, it sums up with a classic quote from Warren Buffet:

Many managements apparently were overexposed in impressionable childhood
years to the story in which the imprisoned handsome prince is released from a
toad's body by a kiss from a beautiful princess.Consequently, they are certain their managerial kiss will do wonders for the profitability of the companies they intend to acquire.

We've observed many kisses but very few miracles. Nevertheless, many managerial
princesses remain serenely confident about the future potency of their kisses -
even after their corporate backyards are knee-deep in unresponsive toads.

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