Xerox Copycats: Collateral Damage

Stock charts are a flawed indicator of a deal's success because acquisitions don't take place in a vacuum. There are too many other factors that influence share price. Still, examples like the superior performance of organic Apple vs. serial acquirer Cisco Systems, which was pointed out recently by WSJ.com's David Weidner is noteworthy. Then there's General Electric(GE), whose acquiring looked pretty good until 2007, when questions about the industrial giant's heavy debt load sent the stock into a nosedive that wiped out decades of gains.

It is also interesting to note that Goldman Sachs(GS), perennially the leading adviser on M&A, does very little acquiring. Nonetheless, the acquisitions it has done are impressive. Its purchase of J. Aron & Company in 1981 was its first since the 1930s. The deal turned Goldman into a commodities trading powerhouse and brought it its current CEO, Lloyd Blankfein, into the fold. That was just a $100 million deal, however.

Larger deals may have their place. For better and worse, all the giants of the banking industry, JPMorgan Chase(JPM), Wells Fargo(WFC), Bank of America(BAC), and Citigroup(C) all grew through a series of acquisitions.

Were these deals good for shareholders? Good for the U.S.? I tend to think they weren't, on the whole, but they may be the inevitable result of modernity. What do you think, readers?

Written by Dan Freed in New York.

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