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Tess Vigeland: Kraft offered more than $16 billion for the British candy giant Cadbury today.
An offer to which Cadbury said, “uh uh.” Not sweet enough. Kraft says it’ll keep trying.
But wait, we’re in the middle of a global recession. And all we’ve been hearing about is how companies are broke and nobody can get a loan to do anything, much less take over a competitor.
Marketplace’s Stacey Vanek-Smith takes a look.
Stacey Vanek-Smith: A couple of years ago companies were in a buying frenzy. Then came the global recession. The first half of this year saw mergers and acquisitions nearly drop in half. Now it seems like things might be picking back up. Last week Disney agreed to buy Marvel Entertainment, Procter & Gamble recently sold off its prescription-drug business, and there’s word that British Airways might try to buy Lufthansa.
APARNA RAM: Well it’s certainly quite a positive sign, isn’t it?
Aparna Ram is with Seven Investment Management. She says companies are feeling confident enough to go bargain hunting.
RAM: By no means is what we saw last year completely over, but we are going to be seeing a lot of companies that have gone through the recession — that have gone through and fixed their balance sheets — and they’re going to be looking at other companies within their sectors and saying, “Ooh, who can I buy right now?”
But economic consultant Gary Shilling says these buys are not such a good sign. He says companies don’t think the global economy will recover anytime soon, and buying competitors is a way to grow when sales are dropping. He says this wave of consolidation is a lot different than the one we saw a couple of years ago.
GARY SHILLING: When there’s money really flowing, there is a tendency to say, “Hey let’s get bigger, let’s get grander, let’s build an empire.” Now, though, I think it’s a very different motivation.
Shilling says when times are good, companies want to buy businesses that will expand their reach into new fields. When times are tight, he says, companies tend to buy competing businesses that can help them build market share, cut costs, and be an opportunity to clean house.
I’m Stacey Vanek-Smith for Marketplace.
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