Comments

Commercial enterprise, as it exists today and has for nearly 200 years in the U.S., is transaction-based. That is, from moment to moment, the people that run companies are making strategic and tactical decisions driven by market conditions AND opportunities (share price strength vs. the competition’s weaknesses for example) that are meant to CAPTURE VALUE AT THAT MOMENT IN TIME.

You may not like that viewpoint, or agree with it morally, but our economy and the market work that way. PERIOD. Don’t believe me? Ask an accountant what the significance of assets and liabilities are on a Balance Sheet. After they explain what assets and liabilities are, they will tell you that a Balance Sheet is ONLY a snapshot in time. In today’s electronic marketplace, the figures may be inaccurate nanoseconds after the statement is printed. Value is temporal, constantly changing.

P.S. The E in P/E comes from the Balance Sheet!

So Synergy may be the Flag, but massive VALUE-CAPTURE, (for a moment in time, for financiers, management and often LARGE shareholders) is the Agenda. Always has been, always will be.

To get a better understanding – look at the history of modern capitalism – check out how JP Morgan operated – check out the so-called robber barons of the late 1800’s. Their agenda was the same as the modern day Icahns. Massive value-capture for a moment in time. PERIOD.

My problem with whole cloth condemnation of mega-mergers, with regards to shareholder value, is that people tend to forget that investing in stocks is not a just a whole lot like gambling, it is gambling. Hence the disclaimer, “Past performance is no guarantee…”

Very few people have the first hand knowledge needed to make an informed decision with regards to buying shares in a corporation. They instead rely on “financial planners”, stock brokers, and fund managers, or worse yet, friends, for advice. Well, at least their friends are probably not getting commissions!

Our system promotes abuse – we raise capital from grandma – and we leverage it for the benefit of few, often leaving grandma broke. Grandma should not have been gambling in the first place! (Shame on those selling stocks to her!!).

We have a designation called Accredited Investor – someone who supposedly understands the risks involved with buying shares in a business. If we limited stock ownership to these types of investors, there would be far less grumbling about the decisions management teams make.

I could go on and on. If there was a wheelbarrow full of ripe apples, would you wait to see if their value on the marketplace went up or down, or would you buy/sell them and/or make apple pie now?

Nothing is certain but change. Carpe Diem.

Posted by people.love.technology at February 1, 2005 6:48 PM

Not only the stockholders, but the customers, too, tend to suffer, because in the mergers/buyouts I've been seen from the inside, this is never taken into consideration be4yond, perhaps, a letter put together by the p.r. department.

And, perhaps, this lack of attention is a key factor in the magnitude of their ultimate, near-inevitable, failure.

If they asked the simple questions like 'how does this benefit our customers?' of course, MOST of these would be outed as brain cramps early. Some would change and become better, I think.

Posted by jeff angus at February 1, 2005 6:58 PM

http://www.franklincovey.com/about/investor/stories/blockbuster_cs.html">http://www.franklincovey.com/about/investor/stories/blockbuster_cs.html">http://www.franklincovey.com/about/investor/stories/blockbuster_cs.html

Did they not get the memo? =)

- Nathan

Posted by Nathan Winchester at February 2, 2005 12:19 PM

Did anyone lose on KMart? The original stock had no value. The lienholders took over.The new Kmart had all this real estate.The original shareholders got zilch.

Posted by Bonnie at February 10, 2005 9:09 PM