NEW YORK (
) -- M&A is back. And that means it might be a good time to sell any acquisitive large-cap companies in your portfolio.
There is so much that can, and often does, go wrong with big deals, so it's little wonder that
(XRX - Get Report)
saw its shares get whacked by more than 14% after it agreed to buy
Affiliated Computer Services
for $6.4 billion in cash and stock. The other big transaction announced Monday,
(ABT - Get Report)
$6.6 billion purchase of the pharmaceuticals business of Belgium's
, got a moderate thumbs up from investors, with Abbott's shares rising 2.6%.
Of course, it's silly to judge an entire strategy by looking at share performance of the acquirers shortly after deals are announced. Initial reactions tend to relate more to the price paid in a deal (too much or too little) than Wall Street's view of the combination's ultimate success. What is less silly is a paper called "Does M&A Pay?" by Robert F. Bruner, which examines more than 120 scientific studies of the question. Though the paper concludes that M&A does indeed pay, most of that conclusion is based on benefits to target companies.
For acquirers, there was a broad dispersion of findings around a zero return, suggesting that executives should approach this activity with caution. A zero return? Hardly good news, though I guess from that perspective if you're a Xerox shareholder you might want to wait for the shares to go back up.