Abstract

The World According to Boesky: How G.M. Bought Itself a Lemon

This column presents a series of occasional articles is intended to help readers sort out the realities and thus identify some of the longer-range problems of what the author would choose to call "The World According to Boesky," (T.W.A.B.), because the disgraced financier is both the best-known figure of the age of merger mania and a paradigm of its nature. According to the author, it's appropriate to begin with a recent merger/takeover that's been much in the news, namely the imbroglio involving, General Motors (G.M.) and H. Ross Perot. It's a deal that encapsulates T.W.A.B. In a nutshell, what happened was this: G.M. acquired Perot's company, Electronic Data Systems (E.D.S.), for about $2.5 billion. After the merger, the more Perot saw of G.M. the less he thought of the way it was managed, and he said so, in public and at board meetings. In the end G.M. bought him out for $750 million-in effect paying him hush moneys and at a fat premium over the price at which G.M. shares were then selling on the stock exchange. Naturally, the affair has loosed a chorus of analysis and criticism, most of it focusing on the ethical pros and cons of the Perot buyout.