Most mergers destroy shareholder value. There are stacks of research reports from academics and management consultants that demonstrate this with hard facts and concrete examples. In my opinion, the merger of Sears
Strategic mergers of public companies make sense under only one condition: The two companies can do things together to create shareholder value that they could not do separately. For example, FedEx's
Where are the strategic synergies between Sears and Kmart? Company officials pointed to $500 million in annual savings in three years from a loosely defined combination of store conversions, back-office job cuts, more efficient buying of goods, and possible store closings.
I'm highly skeptical. To me the number sounds more like a ballpark estimate from an investment banker than a hard number based on clearly identified synergies that someone is responsible for delivering to shareholders. If I'm wrong, perhaps Edward Lampert, the new chairman of the combined company, would be willing to have his compensation based on achieving that $500 million in annual savings in the next three years. Somehow, I doubt he would agree to that.
The reality is that there are no real strategic synergies between these two struggling businesses. Both face uncertain futures and stiff competition from the likes of Wal-Mart
Warren Buffett, chairman of Berkshire Hathaway
Add one more to the list.
Fool contributor Salim Haji lives in Denver and owns shares of Costco and Berkshire Hathaway. He does not own shares in any other of the companies mentioned.
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