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Comment by WalterBright | Hacker News Reader

I've been investing for 30 years. My experience is, whenever a couple megacorps announce a merger, SELL!

The deals always look good on paper, but the reality of trying to merge two gigantic organizations is just an unrelenting, slow motion disaster.

The last time I got gulled into believing the hype was the AOL-TimeWarner merger.

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There are two kinds of mergers: those between roughly orthogonal businesses that want to exploit some vague "synergies" between them (as in the AOL-TimeWarner case); and those between companies that were previously competitors, as in the constantly-growing brewery megacorp of Annheiser Busch. The latter is both much safer for investors, and much worse for customers, than the former; this type of merger has the direct goal of decreasing margin pressure by decreasing competition.

But the second type can also fail quite miserably. Daimler-Chrysler, Kmart-Sears, Sprint-Nextel...

In my opinion, that's a third type of merger: When two ailing companies merge to try to save each other. Best avoided as well.

Sure. But if it works, it's amazing for the shareholders. Just look at Anheuser-Busch Inbev (and their history of merging/consolidating) and their soon to be merger with SABMiller.

And if you don't have the appetite to risk the merged company, the reduction in competition will spill over into other firms. So if you see a marketplace consolidating and you think the reason is to decrease competition, then buy one of the remaining independent firms.

John Malone gave some interesting comments about synergies: https://youtu.be/v5QfCLeloEg?t=2038

It's also often a way for a new CEO to "prove" to the board that he/she is doing good work to propel the company forward.

The key is that they're going through the motions of "doing big things" rather than truly pursuing the best interests of the company.

Not limited to megacorps either. Plenty of smaller companies engage in this behavior.

CEO pay doesn't correlate with effectiveness but it correlates very strongly with company size.

Yes, mergers routinely destroy value http://www.overcomingbias.com/2010/03/hard-facts-mergers.htm...

And just because mergers often destroy value for investors it doesn't mean they don't destroy value for consuemrs and society. They often do both. They allow subverting of the markets and cost customers and society AND management messes up that excess profit oportunity so badly investors loss too.

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