Last year was a bumper year for mergers and acquisitions. Recovering prospects and relatively low price-earnings ratios made the takeover arena alluring: the global volume of deals looks certain to have passed the $4.3 trillion record of 2007. Among the new giants are Shell-BG, Heinz-Kraft, Pfizer-Allergan and monster brewer AB InBev-SAB Miller; bonuses reaped by London M&A bankers will fund basement diggings bigger than Crossrail.
So you might expect me to name my deal of the year: but no. Instead let me quote from Deloitte’s M&A Market Trends Report 2015, based on a survey (in February) of 2,500 US executives: ‘Despite increased deal-making activity — and expectations for another blockbuster year — almost 90 per cent of respondents said that completed transactions have fallen short of generating expected return on investment, the same as last year. On the private equity side, 96 per cent of respondents said their deals fell short of targeted returns.’
That says it all. Four decades of observation have taught me that the best businesses are built by entrepreneurial flair, stamina, calculated risk, encouragement of talent, continual improvement of product and the ability to cope with change. They are rarely made by stock-market-driven mega-mergers, which mostly lead to trouble. So if I have to award a signed copy of my Any Other Business anthology for the most impressive strategic gambit of the year, I’ll mail it to Facebook founder Mark Zuckerberg for his decision to devote the bulk of his $45 billion pile to chosen causes through a corporate vehicle that isn’t quite a charity.
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It’s fashionable to scorn this kind of swaggering ‘philanthrocapitalism’; Zuckerberg, like Bill Gates before him, is not much loved even by devotees of his product. But both are outstanding business-builders, and if they choose to spread their good fortune by giving chunks of it away we should salute them — rather than applauding ‘deal-makers’ whose destiny, more often than not, is the destruction of shareholder value.
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