Filed under: Deals, Citigroup Inc. (C)
With the share prices of most of the financials in the toilet, and hundreds of billions in writedowns done and hundreds of billions more to come, UBS has laid out plans for a break-up, the question is being raised about other financial conglomaterates, most notably Citigroup: does the business model of a huge banking conglomerate that handles all aspects of commerce make sense?
From a risk management, it doesn’t appear to — and that was one of the main arguments put forth by consolidation evangelists like Sandy Weil.
The current mess appears to be demonstrating what many skeptical observers have recommended — and studies have demonstrated — for decades: mergers and acquisitions and other methods of corporate deckchair arrangements don’t add value. In the end, the whole is the sum of the parts.
But that raises the question: why break them up? If stringing them together into a conglomerate didn’t change anything, is there any reason to think that breaking up will change anything? I doubt it.
The bottom line is that all the mergers and acquisitions and spin-offs and break-ups are just a distraction from the real business.
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