When two companies merge, it usually fits my funny formula: One Loser + One Loser = 2 Losers as illustrated by the recent deal with Radio Shack. When one acquires another, it is a different story and usually is profitable for both but not without exceptions such as AOL and Warner Times.
the merger, they can streamline the operations such as one sales force
instead of two (obvious for selling two drugs instead of one) , one
accounting system instead of two...The employees usually suffer or are
The crown jewel is moving the headquarter to the
acquiree's country if it is has lower tax rate. It would be good for the investors / executives but bad for the high-tax countries.
It also teaches them my theory: When you take all the golden eggs from
the geese, they will fly away.
In my book
Finding Stocks, I described how to screen these
companies and I usually pick one or a few during Early Recovery (a phase
defined by me in the Market Cycle). One in 2003 was more than double
and a few in 2009 had far higher returns than the market.