An executive group
Recent Mega Acquisitions.

Recently EBay purchased the communication company Skype for $2.6 billion and depending on the profitability of the company the transaction could take on a value as much as $4 billion. During the first weeks of this year Skype was adding 265,000 new users a month. Business seems good. Is it a risk for the online shopping success story to diversify from shopping to communications? Or is it not? Ebay also purchased Paypal. Paypal is an online financial transaction service site. It is kind of like a bank. The objective is to create an e-commerce and communication solution adding up to powerful communications on the net.

What happens during these mega mergers? There are several points of view concerning this subject. First of all the founders of Skype will stay at the helm of the company so there will not be too many changes. Employees at both companies can be confident that things will go well.

On the other hand, it is not always the case. A case in point. The Canadian aluminum producer Alcan recently purchased the French equivalent Pechiney for several billion dollars making them the largest aluminum producer in the world. The acquisition was more painful. The Canadians laid off almost the entire executive and shut down three factories. For many of the execs caught in the middle of the cross fire it meant the pink slip. This was also true for the factory workers. The Pechiney shareholders will benefit in the deal.

This brings up the question of the consequences of these situations. Who benefits and who doesn’t. The biggest winners are the shareholders. The losers are the employees made redundant. But before passing judgment, consider the impact on the economy and perhaps many jobs of an inefficient industry. Economies change and the efficiency of economies is perhaps the best monitor of changing times.

Frank Jones
Financial Times