{"id":1670,"date":"2010-08-23T20:39:56","date_gmt":"2010-08-24T00:39:56","guid":{"rendered":"http:\/\/www.credittrends.com\/blog\/?p=1670"},"modified":"2010-08-25T16:32:02","modified_gmt":"2010-08-25T20:32:02","slug":"business-acquisitions","status":"publish","type":"post","link":"https:\/\/www.credittrends.com\/blog\/2010\/08\/23\/business-acquisitions\/","title":{"rendered":"Business Acquisitions"},"content":{"rendered":"

The Dow ran up some 90 points this morning, possibly in reaction to Hewlett-Packard’s (HPQ<\/a>) bid topping for 3Par (PAR<\/a>). Analysts and reporters again stressed the cash on balance sheets that has been building since 2009 Q1.<\/p>\n

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And during company conference calls, analysts continue to plug corporate executives to step up their share repurchases, to the extent of writing critical research reports of those enterprises which are not deploying their cash “burden” in support of their stock.<\/p>\n

Undoubtedly, many Boards of Directors are listening, as many firms are again buying shares on behalf of authorizations put in place as far back as prior to the worldwide credit crises.<\/p>\n

This is unfortunate.<\/p>\n

Share prices are currently reacting to the economic slowdown, an event which will not be overpowered by share buybacks. All that does is raise the firm’s cost of equity capital by removing balance sheet flexibility.<\/p>\n

If Boards truly wish to see their stock prices rise they will continue to cut their cost structure and effectively manage the balance sheet and discretionary spending. As an additional step, they should make value-adding acquisitions which will step up free cash flow.<\/p>\n

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