Microcrazy

Everyone's favorite journal has more to say about Microsoft's history. Apparently, Microsoft has always paid a pretty hefty premium for their acquisitions. As the article noted, "The average one-day premium for tech deals since 2000 is 25%, according to Dealogic. The average premium for Microsoft’s deals since during the same time is 43%."

What is their motivation? I'm sure Microsoft may suggest that they simply aren't bothered, and don't want to waste time competing, like Murdoch did with Dow Jones (the publishing firm which owned the Wall Street Journal) offering a 65% premium.

Normally, prices shoot up when an aquisition is announced (look at around May 1, 2007 on this chart showing Dow Jones and other papers), hacking away at any hope for a profitable deal. Or a bid war may ensue (as Bellz noted with News Corp. jumping into the deal).

Clearly, from this perspective, one might assume that Microsoft simply doesn't want to bother with this kind of fight. But, oftentimes, very human mistakes are made, and pay too much because other buyers jump in and a nervous, frenzied, suspicious fight ensues. Jack Welch, the greatest leader since the Pharaohs, calls it "deal heat," (Winning by Jack Welch page 237) and admits that it has affected him in the past as well. This was very common practice in the .com bubble, when companies were being bought left and right, and such buyout practices continue to today in the tech industry. It's an easy assumption to make that Microsoft's corporate culture is just to jaded to bother getting a better, more Buffetlike, price.