Market are often brutally simple. The recent dramatic decline in the price of Bayer’s shares shows exactly what investors think of the company’s planned acquisition of U.S. seed producer Monsanto – namely nothing.
After its takeover bid for the controversial producer of genetically-modified plants, the German pharmaceutical giant lost almost €10 billion ($11 billion) in market value.
The investors’ harsh verdict was not a sign of panic but of careful consideration. Experience has shown that the majority of takeovers go wrong, especially when they involve German companies seeking to acquire U.S. competitors.
The data shows that, prior to a mega deal, most companies tend to achieve higher profit increases, are more profitable and provide their shareholders with stronger price gains than after completing a takeover. Besides, the cultural differences are often so great that there is simply no chemistry between management and labor.