This NYT DealBook article, noting that numbers of deals are on the rise although deal volume has fallen in dollar terms, reinforces the idea that dealmakers are increasingly recognizing that a steady diet of smaller deals is better than the occasional big deal. Excerpt:
But the preferred transaction isn’t a transformational deal so much as a “bolt-on” one, a takeover that adds to an existing division instead of bringing in an entirely business line. Many of these mergers have tended to be rewarded by acquirer’s shareholders, as in cases as disparate as Aetna‘s takeover of Coventry Health Careand National Oilwell Varco‘s purchase of Robbins & Myers.
More ambitious acquisitions have tended to draw investor fury. Daikin Industries’ shares dropped 3.5 percent on Wednesday after it announced a takeover of an American rival, Goodman Global, that analysts said could tax the Japanese air-conditioner maker’s finances.
WellPoint's CEO Angela Braly, whose tenure was quite an acquisitive one, has stepped down, NYT report here. The Board has reportedly affirmed the acquisitions strategy while calling it the right time for a change.
Elsewhere, NYTDealBookreports that analysts and the market reacted negatively to Daikin's acquisition of Goodman (stock down 3.5% on the day after the announcement). Related BusinessWeek story here. (Two concerns expressed by analysts in Japan: the deal may be too big for Daikin to digest, a North American target may not really help Daikin where the growth is, which is Emerging Markets.) McKinsey has a recent analysis of Japanese outbound M&A deals - apparently an appreciating yen and stagnant domestic market are driving overseas M&A, which could soon cross its previous high (1990).
A $3.7B deal between air conditioner manufacturers was reported today (NYT) in which Japan's Daikin will buy the US company Goodman. The air conditioner business is at an interesting point in its evolution: economic growth in the emerging markets has led to skyrocketing demand, while questions about greenhouse gases and sustainability mount. Two related articles: about the rising use of airconditioning, and a profile of Zhang Yue, CEO of the Chinese company Broad Airconditioning, a leading manufacturer of central air-conditioning systems that use diesel or natural gas rather than electricity.
Pitt's 12-13 academic year is off the ground today, first day of classes. Looks like it was a bit of a Merger Monday as well, what with deals like Hertz/ DollarThrifty, M&T Bank/ Hudson City Bancorp, IBM/ Kenexa and IAC/ About in the news (NYTDealBook coverage here.)
This WSJ story illustrates how acquisitions often increase market (and pricing) power - this time in the context of hospitals buying physician practices, with increased medical bills being one outcome.
WSJ's Ahead of the Tape had this on Kraft's impending split-up. Commenting on CEO Irene Rosenfeld's decision to buy Cadbury in 2010, the article says:
Since the day before the Cadbury bid, Kraft has had a total return of 57%.
But that doesn't mean she was right. Kraft paid a 50% premium for a business that makes up a large part of what is being split off 18 months later. And while fast growing, over 80% of the business's sales come from outside North America.
Steven Koch, Credit Suisse's Chair of M&A so far, was on CNBC this morning - he's leaving the investment bank to become Dy. Mayor of Chicago. NYTDealBookreproduces the Credit Suisse memos announcing the departure and introducing his successor, David DeNunzio, respectively.
Interesting career sitch for Steven Koch, BTW. Harvard Kennedy School's Joseph Nye is credited with the argument that leaders of the future need to be "tri-sector athletes," able to navigate the business, non-profit and government sectors. The label has found some traction, including on the recruiting section of McKinsey's website. I wonder if Koch's move is a reminder that complex societal problems do require leaders will tri-sector capabilities.