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The next big buy out


A reader, not too long ago, accused me of having no
economics or business sense, to which I took great exception because it was
true.

So as I comment here today about mergers and acquisitions
just keep in mind I know nothing about anything.

Maybe these questions have popped up for centuries, but as I
read this week about plans by Glencore, the world’s largest publicly traded
commodity supplier to buy Viterra (and now Richardson International and Agrium
have got into the deal), the questions that come to mind are “when is enough,
enough?” “When are you big enough?” “When does the bubble burst?”

I know there are economies of scale — if you are setting up
a pen to raise five chickens, you might as well add another couple feet and
raise 10 — the cost may be 10 per cent more, but not double and you have twice
as many birds. I get that. 

But, I look at these companies — and it’s not just
agriculture it is every corporate sector – and the mindset is to buy more, get
bigger. But when is enough, enough? Glencore is the biggest commodity trader
already and it buys the largest grain company in Canada. So what will that
mean? I guess it becomes a good deal for Glencore and likely Viterra
shareholders. But, does it do anything for farmers or a milling company that
uses Canadian wheat to make bread, and really does it do anything for society
in general?

Oh, geez, I am turning Liberal or worst yet, a tree hugging
socialist — an orange NDPer? If this persists someone shoot me.

Maybe there are all kinds of economic theories that support
why bigger is better — and the economies of scale is a good one — but, I
suspect there comes a point in business where it really has nothing or little
to do with strengthening the company and is more about egos and bragging rights
— they do it because they can — in this case little Bobby Glencore now has more

marbles than anyone else.

The other observation, in my economic ignorance, is
eventually as these corporations get bigger, they also begin to fall apart. It
may not always happen, but often enough.

I like to see smaller, independent businesses or underdogs
succeed, but something pricks my senses when big business cuts an even-wider
swath. I wouldn’t say it is fun to watch giants fall, but I have to confess it
does stir some morbid satisfaction. Here I am commenting about cold hearted,
dollar-driven economics, and truth is I may be no more compassionate myself.

Lee
Hart is a field editor for Grainews in Calgary, Contact him at 403-592-1964 or
by email at
[email protected]

 

 

 

 

 

 

About the author

Field Editor

Lee Hart is editor of Cattleman’s Corner based in Calgary.

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