Cadbury deal shows little or nothing has been learned
The Cadbury/Kraft deal repeats all the same mistakes that generated the downsides of the last twenty years:
1. It’s a deal done to enrich shareholders rather than for the benefits of the company;
2. It’s a deal recommended to shareholders by people with a massive vested interest in the deal going ahead (notably the Board and a mass of consultants);
3. It’s a deal that relies heavily on borrowed money to fund the buyout;
4. It’s a deal that allows the supposedly free operation of the market and its benefits to trump other issues such as national identity, job security, and quality of produce even though we know that the mergers and acquisitions have a poor record of improving company performance;
5. And it’s a deal which goes through because it is largely supported by short-term investors after a quick buck than those with a long-term interest in the company.
Maximum discomfort now needs to be felt by Kraft and by those who will benefit from this deal. Only through public and media pressure might we be able to stop another era of pointless and damaging mergers and acquisitions.
The vested interest that drive this activity deserves to be as big a scandal as the bank bonuses.