Opinion | Wall Street's titans are worried work from home could kill the 'art of the deal.' That may be bad news for their myth-making, but it's great news for most workers and the US economy. By AlexYablon.
coming from the elite executives and financiers who oversee this system and reap most of its rewards.So deals don't seem to be slowing down, but let's for the sake of argument accept the premise that long-term work from home could materially slow down the number of deals done. Would that be such a bad thing?
Decades of research have shown that the vast majority of mergers and acquisitions fail. As business professor Nuno Fernandesfor the Harvard Law School Forum of Corporate Governance on the eve of the pandemic's historic deal boom,"most mergers and acquisitions fail to generate the anticipated synergies—and many actually destroy value instead of creating it. In other words, a significant percentage of M&As cause 2 + 2 to equal 3 instead of 5.
Mergers are often pitched to potential buyers as shortcuts to growth and market share. But as corporate consultants Alan Lewis and Dan McKone, the surest route to skyrocketing corporate growth is also the hard one: using one's existing assets to create new products customers actually want to buy. Sometimes mergers can work out if they are part of a clear strategy to create a new product, but Lewis and McKone argued that most of these deals are fueled more by C-suite FOMO.
Megamergers typically sour because the big acquirers overpay for targets that don't actually provide anything useful to the buyer's business. As Fernandes wrote in his 2019 book"The Value Killers," it's precisely the elite bankers now whinging that remote work threatens their craft who ensure that their clients pay sky-high valuations for bad deals. That's because theis"always on the side of the deal, not the company's side.
So if evidence shows that most mergers fail, the current M&A surge looks very different: it's likely the prelude to a hangover for most of the companies involved. That's bad news for shareholders, but more importantly, for the workers who almost alwaysafter the deals close. When mergers inevitably disappoint, the combined company isn't going to create many new jobs . And debt incurred to complete the purchase leads to even more layoffs.
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