No one on wall Street puts it quite like Carl Icahn. “There are far too many boards”, the veteran activist investor opined on June 24th, that “believe...that stockholders are the peasants who represent a necessary evil that must be tolerated, possibly patronised, but certainly ignored.” Mr Icahn’s target was Occidental, an oil firm whose directors are pursuing an unpopular $55bn takeover of Anadarko, a rival. But his outburst reflects a broader change in mood on mergers and acquisitions. Dealmaking always reflects a power struggle between empire-building executives and bankers, and more cautious investors and regulators. After years of waving through deals, shareholders and trustbusters are now getting testier again.
Since 2000 a big trend in American business has been domestic consolidation. Firms have sought to grow at home in order to reap economies of scale and to dampen competition. Some industries, for example telecoms and airlines, have become far more concentrated. The result has been higher corporate profits, which is why investors have cheered the dealmaking on. A long-standing rule of thumb is that takeovers usually destroy value for the acquiring company, which overpays. But over the past decade that has not held true in North America. Since 2008 the share prices of acquirers have outperformed the stockmarket by a median of 1.1% in the quarter when the deal was announced, according to Willis Towers Watson, a financial firm.
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