The world’s market seems saturated with consolidations recently, after D Borse announced to merging with NYSE, a consolidation between LSE and TMX in Toronto has began, together with cooperation between News Corporation and BSkyB. From these merges talked above, it is easily for people identify that almost all the merges and acquisitions occurred in the same sector. This is primarily due to their shareholders unwilling to buy shares from a different industry. Indeed, it is reasonable for thinking that every company runs their business in the interests of shareholders. However, people maybe question about who is the biggest beneficiary among these merges?
We are instilled about the concept that shareholders in the target company will be the biggest beneficiary, in that their company always has been bought with a high price, hence they can enjoy the share premium. A classic example is the merge between D Borse and NYSE recently. After this merge, D Borse shareholders holding 60 percent in a new company, while NYSE shareholders holding 40 percent. However, in order to acquire NYSE, D Borse gave a 10 percent share premium to NYSE (Financial Times). It seems that share premium act as a lure to attract target companies agree with the merge. However, put this fact alone, not all target shareholders are the beneficiary. Occasionally, merges and acquisitions may fall into a destructive situation. It is possible for companies choose merges because they have no choice or run out of ways to grow “organically”, David Lis, head of UK equities with Aviva Investors, says that “when companies want to keep the wolf from the door, the only choice for them is to have a friend”. If the target company merge with the acquirer in this situation, it is possible for them to be lost in a severe business environment. The acquisition between News Corporation and BSkyB is a typical example. As a rule of thumbs, News Corporation’s proposed bid for BSkyB is good for News Corp. After a scandal of “phone hacking” in News Corp last month, this company’s share price are serious been affected and set back Murdoch’s effort to takeover the full ownership of BSkyB. However, from BSkyB shareholder’s perspective, News Corp’s original bidding price of 700 pence per share turns out an underestimation of BSkyB’s share price (820 pence). Even though the final bidding price is 800 pence a share, it seems that BSkyB shareholders acted as a looser in this acquisition. Moreover, from BSkyB employees’ perspective, the merge still like a disaster for them, as BBC reported that Murdoch fired editors from “The Times” and “Wall Street Journal” after he acquired those newspapers, ironically, Murdoch even promise that he will remain editors’ independence before the merge. Hence, no one can guarantee that Murdoch will keep all of BSkyB employees even though he find his company no longer need those employees in synergy.
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