Re: Confidentiality at work ..
uncle jee…organic growth takes so much time especially if you want to grown in a new segment. i mean if you are a big conglomerate with no position in O&G segment and wants to have a $10B+ oil & gas portfolio say in 6 years what other option do you have except doing 3-4 big acqusitions
do we pay too much? probably yes but who would sell a good business for less than 20-30% premium on LTM stock price? all depends upon rev and cost synergies that you project to offset the premium that you are paying…and yes rev synergies are most probably bul**** and realistically speakings all you can get are cost synergies
i dont think it is all about empire building or CEO’s ego…the fact of the matter is that big conglomerates run their businesses like a portfolio where you divest bunch of businesses that do not fit into the long term strategy and replace them with new ones…you have so much pressure from the wall street to show growth both in top line and bottom line that you have no choice but to keep streamlining and diversifying your portfolio…get rid of low profit, slow growth businesses and replenish the portfolio with fast growing high margin businesses…good strategic targets are limited so you gotta pay high premium.
do you know how much of a stress it is for a CEO to do a big acquisition? if he messes up the integration, he will most likely be fired..recently GE bought alstom and i am sure you saw that their CEO jeff Immelt was negotiating directly with the French president and it was all over the press…must be nerve wrecking and less of ego boost!!!