KUHN CAPITAL Tuesday, March 20, 2018
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DoJ Gets Washing Machines Right


You may remember the tortured argument advanced by the Department of Justice to kill the Oracle/PeopleSoft deal two years ago. Something about it reducing competition in a multi-billion dollar software industry populated by the likes of SAP, Microsoft, IBM, Siebel Systems, Lawson, ADP, and uncounted others.

After an embarrassing rebuke for such magical thinking by the presiding judge, the DoJ has apparently blunted its anti-business agenda: it has decided not to interfere with the proposed $1.8 billion Whirlpool/Maytag merger. The logic advanced this time acknowledges the reality of global competition.

What we didnít know was the affect the DoJís meddling in the Oracle/PeopleSoft deal had on the markets, and therefore what good news for shareholders its decision to greenlight Whirlpool/Maytag represents.

According to the American Shareholders Association, in the six months following the DoJís decision to interfere in Oracleís plans, M&A activity declined $153 billion versus the preceding two quarters. Conversely, after the judge ruled against the DoJ, M&A activity surged back to prior levels.

In addition, the stock of all companies most likely to acquire other firms declined by about 450 basis points over nine months, the first such decline on record. Immediately following the court decision, the stock of these companies returned to its traditional over-performance.

Three cheers for enlightened (i.e., minimal) regulation and shareholder wealth.

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