There are a couple of stories today questioning why an expected wave of mergers and acquisitions hasn't happened yet. We should be glad it hasn't.
The New York Times writes that a mere 8,115 deals happened around the world in the first quarter of 2013, which actually sounds like kind of a lot, but is in fact the lowest number in a decade. The total value of the deals, $542.8 billion, is down 26 percent from the first quarter of 2011.
This dearth of deals is happening despite bankers and lawyers "publicly boasting about a nascent revival in mergers," writes the NYT's Michael de la Merced, which was supposed to be the natural result of an improving economy and record-high stock prices.
Meanwhile, at the Wall Street Journal, my old boss Francesco Guerrera wonders about the lack of deals (subs only, sorry), saying the time is ripe for some good old fashioned merger mania: "Money is cheap, stocks have hit records, many investors want consolidation and yet M&A is surprisingly sparse."
This is bad news for bankers and lawyers, who do have mouths to feed. But it is not such bad news for many of the rest of us. It's not that mergers are evil. But some are spectacularly disastrous, crushing shareholder value and destroying jobs and franchises. And those bad deals tend to happen more often when CEOs get too much of the "chutzpah" Guererra says they're lacking today (it's an old Italian word) and try to keep up with each other in a wave of consolidation.
The Interwebs are lousy with studies about why mergers fail. One consistent theme is that mergers that happen during "merger waves" tend to fail more than others. An American University study from a couple of years ago found:
Our findings show that firm value is positively impacted in the first one to three years post merger by acquiring related assets, but that participating in a merger wave in these years has a negative influence.
A 2006 Wharton study found something similar, saying "horizontal mergers are followed by substantially worse performance when they occur during waves."
For now, CEOs are spooked by the never-ending meltdown in Europe, the political fights in Washington and the sluggish economy, but one of these days these problems are going to fade just enough that CEOs get their mojo back. When that happens, there will be tons of easy credit available to help fuel another merger boom. And watch out.