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  • Fools Corner
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Splurge or merge?

Nature Biotechnology volume 21, page 485 (2003)Cite this article

Next time you hear a politician bloviate about lower taxes with, “After all, it's your money!” try to remember the last time you heard a corporate CEO tell shareholders the same thing. Take the steady and increasing spate of biotech mergers. Managers may assert that a deal will enhance shareholder value, but rarely speak plainly why it beats a share buyback or dividend, internal product development, or even collecting interest on the cash.

They should, because research indicates that the majority of mergers do not succeed for investors in the long run. A Business Week study last fall1 put average devaluation of a company's market capitalization at 61% for all US mergers, while consulting firm KPMG (now Bering Pont, New York, NY; NYSE:BE) says more than half destroy value and another third make no difference.

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References

  1. Editorial. Business Week, 14 October 2002.

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Authors
  1. Tom Jacobs
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Tom Jacobs of Motley Fool () provides his angle on biotechnology investments*. He can be contacted about biotech and investing at . Jacobs cannot give individual investment advice but welcomes any.

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Jacobs, T. Splurge or merge?. Nat Biotechnol 21, 485 (2003). https://doi.org/10.1038/nbt0503-485

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