Mergers and acquisitions always make the news in the finance world. They are more like a sensation and for business-oriented readers who try to be up-dated the M&A news are more catchy than the news on celebrities.
M&A is a hot topic for a number of reasons.
1) As a result of an M&A deal the market dynamics change. Companies increase market share and might end up into a situation of market dominance.
2) M&A typically create synergies and the created value is always higher that the value which is stated separately in the balance sheets of the two firms entering into the deal.
3) M&A are interesting from a legal and competition policy/antitrust perspective. The intervention of the Competition Authority in Europe or the Antitrust Division of the U.S. Department of Justice in the US means that embarking on an M&A deal is more than a business proposition, it is a very strategic in nature decision and the policy making process in the respective country where the deal takes place is a significant additional consideration for the business contractors.
Besides the major considerations in this framework, additional factors which are specific to each case play a significant role.
April 20th, 2009: The breaking news is that Oracle will acquire Sun Micro Systems for 7.8 billion. Given the software synergies and the fact that Oracle is acquiring Sun Microsystems at a low multiple, the deal is a good move. The Sun Solaris/Oracle combination has received a lot of positive feedback. Oracle is enhancing its position in the database market and is probably raising a lot of questions: does the future belong to open source or closed source platforms? Talking about open source and closures, it is inevitable to discuss market dominance. Acquiring so much hardware, will Oracle compete with IBM, Hewlett-Packard and Cisco Systems? When a company starts increasingly ferociously its market share in a field, it is already one step from attempting a closure.
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