Bigger = Better?

HP is merging with Compaq. They will keep the HP name. Although I've seen several interesting combinations to tout the merger. Methinks that HPaq is the best of the lot.

I won't hold my breath about the merger. Bigger seldom equals better (unless you are a sumo wrestler).

Thousands will lose their jobs, of course. It comes with the territory. Only a select few will enjoy being separated from either company. Only those that will need and can afford Brinks trucks to haul their golden parachutes, will come out of this smelling like a rose.

What a lot of people don't know and the companies that are merging never tell you is that when the merger closes, all of the billions in the acquired company's bank account belongs to the victor. Selling out is the only legal way that the top brass of the company can lay claim to a good sized portion of that money.

That's what happened when About.com was acquired by Primedia. About had had a second successful stock offering and had $125 million cash in the bank. Primedia wanted (and needed) that cash bad! The chairman and CEO of About wanted to get his hands on that money too.

So he sold About. Primedia got the $125 million cash. The About CEO got a cushy salary and title and stock options. Only months later did the rest of the story come out. His contract guaranteed him $25 million for his PRM stock that he got in the sale. Last I heard, it was worth only about $9 million and Primedia is having to fork over the $16 million difference. Want to bet whether Primedia is looking to acquire another company with millions in the bank?

Sounds like a Ponzi scheme, doesn't it?