One reason companies want to do deals is interest rates are so low, financing them is cheap. But a lot of companies have saved so much money, they can pay cash. And it’s cash they don’t necessarily know what else to do with…..
James Brock: You know, what I think it offers, I think it offers is this kind of romantic illusion of fast growth.
Emphasis on illusion. He says historically most of these partnerships don’t last — think Daimler Chrysler, AOL and Time Warner. One question is why companies don’t invest their savings in themselves — hire more workers or build new plants.
Brad Hintz is an equity analyst at Sanford Bernstein. He says an acquisition — if it’s at the right price — can be the better bargain.
Brad Hintz: When the stock market’s valuation is low, it’s actually cheaper to go out and buy whole companies and get their workers that way than it is to go out and hire workers and invest in new plant and equipment.
