After a period of seemingly sensible, strategic acquisitions in which buyers bought companies that fit logically into their business, a deal arrives that’s left investors and M&A wonks scratching their heads — and selling shares.
    
Macrovision on Friday said it would buy Gemstar-TV Guide for $2.8 billion in cash and stock. Stocks of both companies plunged on news of the deal. 
    
When was the last time an acquirer’s stock tanked 25 percent — and its target fell 15 percent, as they have in this case? The drop in shares raises serious questions about whether shareholders will allow the deal, which JPMorgan and UBS advised on, to go through.
    
Let’s count the ways that this deal has frightened investors.

For one, it’s unclear just how Macrovision, a software maker, and Gemstar-TV Guide, which produces television programming guides, would meld together.

Macrovision said it would combine its anti-piracy technology with Gemstar’s interactive program guide, technology used by cable and satellite television companies, to allow protected TV shows, films, photos or music to be available on many devices beyond the television. 
    
So this appears to be a concept deal rather than a strategic one. Here’s a few other reasons why the market is turning its nose at the proposal.

News Corp, which owns 41 percent of Gemstar, has seen the investment drop in value. Gemstars market capitalization was $30 billion in Sept. 2000 when News Corp. said it was becoming the company’s largest shareholder. If News Corp. can’t make it work, can Macrovision?
    
Finally, Macrovision said it plans to raise $800 million in new debt to help finance the offer. Given the extent of the credit crunch, it’s a heck of a time to look to the debt markets for financing. 
    
It’s only Day One of the announcement, so who knows. Maybe the companies can make a deal work. But judging by the share reaction, they’ve got a lot of explaining to do.