Winners & Losers in M&A

Technology groups Google and Oracle and energy companies XTO and Transocean enjoyed the best share price performance among U.S. corporations making large domestic acquisitions this year, according to Dealogic data, reports Financial Times.

 

Figures from the data provider show how shareholders have been willing to reward big deals in the technology and energy sectors, while financial services groups have been unable to offset the pain of the credit squeeze with large acquisitions.

 

Wachovia and Bank of America, the two North Carolina-based banks, were among the worst performers, according to Dealogic.

 

Shares of Google, which took the top spot, rose 47 percent between its announcement in April of the Doubleclick acquisition, the internet advertising company, and December 14. The search engine outperformed the S&P 500 index by 44 percent.

 

Second place went to Trans-ocean, which in July made a bold consolidation move in the oil services sector, acquiring rival GlobalSantaFe. After the deal was announced, Transocean outperformed the S&P by 31 percent.

 

Meanwhile, Oracle was rewarded for its purchase of Hyperion Solutions, a rival software group, and XTO gained in the wake of its acquisition of assets from Dominion Resources.

 

The fourth annual Dealogic analysis provides some evidence of investor reaction to big consolidation moves. However, it falls short of an evaluation of the best and worst deals. A company’s ability to implement projected cost savings or revenue targets related to a merger often cannot be calculated for months after a deal closes.

 

The worst performer in 2007 was Vulcan Materials, which makes construction aggregates. It agreed to buy Florida Rock Industries in February, just as the U.S. housing market began its decline. Vulcan shares have underperformed the Standard & Poor's index by 29 percent since then.

 

Bank of America also suffered after its purchase of Illinois-based LaSalle Bank in April. Its shares have fallen 17 percent compared with the index.

 

Wachovia has underperformed the S&P by 24 percent since its takeover of AG Edwards, the brokerage.