Opinion

The Great Debate

from Breakingviews:

Rob Cox: ITT’s ghost hangs over Silicon Valley

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The number of entrepreneurs in Silicon Valley familiar with the work of Harold Geneen would hardly fill a 140-character tweet. After all, Geneen wasn’t a technologist, the inventor of a new computing language or the founder of a seminal startup. He was the original M&A machine – the man whose deal-making 50 years ago turned ITT into a multibillion-dollar conglomerate.

As tech giants like Apple, Amazon, Facebook, Alibaba, Rakuten and Google mature and canvass the globe for businesses they can buy that are a few steps removed from their core activities, Geneen’s story is becoming more relevant. These titans of the internet age are embarking on diversification strategies not entirely dissimilar from those of Geneen’s ITT and its many followers, including LTV, Transamerica and Gulf+Western.

Just tick through some of the recent techland shopping excursions. Front of mind, there’s Apple’s potential $3.2 billion pickup of Beats Electronics. It makes headphones not telephones and tablets, from which the company founded by the late Steve Jobs derived three-quarters of its revenue in its most recent quarter. Still, the company can make some sort of industrial case for Beats, given its streaming music service.

That’s less the case with Google’s purchase of Titan Aerospace, a maker of high-altitude drones. The search giant run by Larry Page argues that both companies “share a profound optimism about the potential for technology to improve the world.” According to Google: “It’s still early days, but atmospheric satellites could help bring internet access to millions of people, and help solve other problems, including disaster relief and environmental damage like deforestation.”

from Breakingviews:

AT&T puts shareholders on hold for DirecTV

By Jeffrey Goldfarb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

AT&T is putting its shareholders on hold to buy DirecTV. Its $67 billion acquisition of the satellite TV operator announced on Sunday brings with it an unexpectedly robust $1.6 billion of cost savings. Even so, these don’t quite cover the cost of the premium. In any case, AT&T says it will use the money to roll out rural broadband service. Customers and regulators are getting the first call.

A little more than three years after AT&T launched an eventually torpedoed $39 billion bid for T-Mobile US, it has found another acquisition target big enough to match its ambitions. Instead of expanding in domestic cellular, though, the $190 billion company led by Randall Stephenson is aiming to marry video and broadband as the competitive landscape for television and internet service reshapes for the mobile and digital era.

from Breakingviews:

Rob Cox: The worry now is a brewing M&A bubble

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Stop worrying about the tech bubble – there may be an even bigger one inflating beyond the confines of Silicon Valley. The corporate urge to merge has gone into global hyper-drive this year. Deal activity has surged as investors egg companies on and bid up the shares of acquirers well beyond mathematical explication, or prudence. As new metrics from interested parties are trotted out to justify the irrational, it’s time to exercise caution.

So far this year companies have announced some $1.3 trillion worth of transactions around the world, according to Thomson Reuters data. That’s nearly double the level of activity a year ago. European corporations have fueled even greater increases. Much of this is pent-up demand and a delayed response to the past year’s remarkable runup in stock market values.

Look to deal numbers for M&A green shoots

Alex Smith-GreatDebate

– Alexander Smith is a Reuters columnist. The opinions expressed are his own –

Volumes may be down, but there are green shoots appearing in the M&A market after the frozen winter of financial distress.

This doesn’t mean a return to the boom years of a few years ago. It could take years for deal values to reach the dizzy heights of the second quarter of 2007, given falls in asset prices. But the number of deals is recovering fast. This fell off a cliff in Q1 of 2009 and at just over 8,000 deals was the lowest global tally since Q3 2004.

  •