Lessons from a Masters In Business Administration: Mergers and Acquisitions / Porter’s Theory

Mergers and Acquisitions: Company A announces a merger with Company B, it offers a price x, for Company B which is about Company B’s current stock market valuation. The arbitrageur asks himself, is the likelihood that this deal will actually go through? Will the shareholders of Company B accept it? Will there be account fraud of Company B? What if the CEO of Company A dies? The stock prices of the merging companies move around more than usual as investors weigh up the probability of the merger’s taking place. For risk arbitrageur, the risk of losing $100,000 is .1% and the risk of losing $500 is 20%. They spend an inordinate amount of time thinking about the 20% chance ruining a day instead of the .1% chance of running a career. Everywhere in life there are small risks of disaster that you would think of as an arbitrator: chances of the babysitter turning to be a kidnapper; and the costs would be infinite.

Porter’s Theory: Michael Porter believes that competition is the engine of productivity, growth and every business, town or country should be seeking out a competitive advantage. He’s not interested in cost and willingness to pay…

Private/Public Sectors: The relationship between business and government. Government gets its tax revenue from businesses, don’t ever forget that fact. Many believe that business does not need government whatsoever. MBAs are taught to believe that business is the most important institution in society.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]