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The disappointment of mergers and acquisitions

Do mergers and acquisitions make sense?

Kraft and Heinz are to merge. Is that good or bad? The answer depends on who you are. But mergers and acquisitions rarely create shareholder value, according to received wisdom. Of course some (some shareholders, the advisers) are going to benefit otherwise they wouldn’t happen. But the businesses as a whole usually suffer.

And so do other stakeholders. Staff will typically suffer as one of the rationales for such deals is usually staff savings. Suppliers are similarly likely to suffer because the rationalisation of procurement is another driver. But such stakeholders are never consulted in advance of an agreement.

And the environment is rarely mentioned – when was the last time you heard about a big deal that was justified as necessary to preserve the environment?

Beyond the particular companies involved in any deal, through the consolidation of organisations of such scale the economic system as a whole loses diversity and resilience. With fewer participants and fewer, more controlled connections between them, the economy becomes more fragile and less responsive.

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