Thursday, November 18, 2004

A flash in the pan or the big bang ?

The Kmart / Sears merger came as a shock to me. Then again, it was not a real shock if you follow ESL! Pieces have already started appearing heralding this mega-merger as kickstarting a long M & A binge. I do not particularly care when that binge starts as long as it is within the next 2-3 years.

I will be a bit uncomfortable if we don't see a merger-mania (80's style!) by then. Companies now have the largest absolute cash hoard in history. Taxes are low. Growth opportunities for many companies are non-existent. A ripe setting for takeovers!

If this merger ends up being a false-start, it is ok. The longer the drought, the heavier the downpour that will mark its end! So prepare for the 100-year flood following the 5-year drought.


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