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Stock volatility hampers M&As

Week 48, 2008

From this point, both Wavecom Board of Directors and Gemalto, especially Gemalto CEO Olivier Piou, have issued several statements showing the difficulty in reaching an agreement on the potential takeover. The offered share price for the takeover was consistent with the stock exchange share price at the time of the offer. An impact of the current stock exchange volatility due to the international financial crisis, is that a proposal deemed reasonable at a time given similar transactions and company valuation may become totally unreasonable after just a few weeks.

In the immediate environment of our industry, we also witnesses a few other mergers and acquisitions projects, which are hampered by markets volatility, and credit restriction. For instance, ON Semiconductor and Microchip technology have announced they abandoned their plans to acquire Atmel, due to uncertain market conditions.

The ongoing crisis, besides threatening the secure transactions markets and natural customers: financial institutions and telecom operators, also creates lots of uncertainty in future financial means for companies to develop their activities. The crisis also triggers a never encountered volatility on the stock exchanges, that makes any mid- and long-term planning hazardous, and creates trouble in planning an operation such as a hostile takeover.

"Maturity is the capacity to endure uncertainty," said John Huston Finley (1863-1940), a well-known American author and professor. What we are experiencing now is undoubtedly a maturing experience for our industry.

Thierry Spanjaard

Chief Editor

Smart Insights