There are three things that are certain: death, taxes and M&A "synergies." And while the recent debt and record stock price-funded M&A bubble has been a present from god, or rather the Fed, to the activist shareholders and owners of target stocks (and acquirors, because in the New Normal M&A announcements somehow boost the price of both), it has been a scourge for everyone else: namely the employees of companies that undergo M&A as the first and foremost place where EPS "synergies" are extracted is by eliminating duplicative headcount, read mass layoffs. This is precisely what workers at Canada's Tim Hortons are about to find out first hand, because as Financial Post reports, citing a study from the Canadian Centre for Policy Alternatives, "widespread layoffs and strict cost cutting measures could befall Tim Hortons if Burger King’s parent company takes over the chain." Small correction replace "could" with "definitely will" and the sentence will be spot on.
The left-leaning think-tank released a scathing review of 3G Capital’s past takeovers on Thursday and concluded that the Brazilian private equity firm’s track record is predictive of “overwhelmingly negative consequences for Canadians” and the Tim Hortons restaurant chain.
“Without additional strong assurances from 3G Capital that no jobs will be lost … this may not be in the net benefit of Canada,” said CCPA senior economist David Macdonald, who was involved in the preparation of the report.
Well, maybe not Canada. But it certainly will be in the net benefit of Canada's billionaires, and they are the only ones who matter.
The policy centre said 3G Capital hasn’t made a suitable case for how the merged company benefits Canadians and it’s urging the federal government to demand “a better deal” before it approves the transaction.
Included in its analysis is the assumption that the investment company, in its US$11-billion takeover of the Canadian company, would follow a similar playbook to past takeovers.
The report suggests 3G Capital’s debt financing could force Tim Hortons to layoff more than 700 employees — or 44% of staff working outside its restaurants — as its tries to manage the debt of the merged company.
The new obligations could pressure Tim Hortons to cut costs, reduce investments and squeeze more from its franchisees, the report said.
So much negativity: maybe in its attempt to be fair and balanced the Financial Post should at least mention the huge positive - consider the billions in stock buybacks that these mass layoffs will permit? After all, now that the Fed is taking a hiatus from the monetization business, someone has to make sure that risk is, for the 6th year in a row, not a concern to the world 0.01%. Because how else will wealth trickle down?
And failing that, will someone please think of the billionaire children?
