The Yahoo and Rio Tinto deals have one thing in common, besides being abnormally large.
They are both being initiated by new CEO’s where the predecessor has just departed.
This makes it seem that they are trying to stamp their own mark on their companies, and that is perhaps true.
It is probably likely that at least one of these deals were thought of before the previous CEO left, and this information should emerge with time.
So it comes down to the real motivation. Are these deals really value adding, or are they merely ego boosting?
I’m happy that the Rio/BHPB combination is value accretive. It’s a logical combination that has some pretty well understood and easily gained synergies. The post merger plan will be relatively simple and quick. Marius Kloppers inherits a well oiled machine, one that he had a substantial part in building, and one that can absorb Rio Tinto’s assets.
I’m not at all confident that the same applies to Microsoft and Yahoo. It’s perhaps 10 years too late for this deal – and better deal right now could have been a leveraged play at market leader Google. CEO Steve Balmer has run an increasingly complex and increasingly poorly performing business. He should be looking to clean up his own house before embarking on a buying spree.