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Technology Stocks : Vodafone-Airtouch (NYSE: VOD)
VOD 14.54+0.2%1:14 PM EST
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To: MrGreenJeans who wrote (2168)11/24/1999 8:54:00 PM
From: Chuzzlewit  Read Replies (2) of 3175
 
MrGreenJeans,

Thanks for your analysis. My problem is simply this: while I have no doubt that a merged VOD - Mannesmann is a more valuable entity than the sum of the two taken separately, I do have serious doubts about the value VOD shareholders will receive. Put another way, I fear that the expected synergies will not be sufficient to offset the dilution in ownership I will experience.

Continuing further, I fear that many executives do not view their role as trying to maximize shareholder value, but instead, try to maximize the value of the organization. These goals can be often be in conflict with one another, because the latter may foster a growth at any price strategy.

There is an excellent article in the November-December Harvard Business Review on the financial economics of mergers. The article points out two very interesting issues: first, the transfer of a portion of the risk of synergy to the shareholders of the acquired company when stock is used as a currency; and second, because of equity dilution factors, it turns out that the acquired company often ends up acquiring the acquirer! I have skimmed the article only briefly; I will read it in depth this weekend and summarize the major points.

TTFN,
CTC
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