Interesting article at Bloomberg today about the recent vintage of under-performing M&A deals (see M&A Losers, ht Donald).

More than half of the 100 biggest takeovers made during the last mergers-and-acquisitions boom have something in common: By one measure, they never should have happened.

The stocks of 53 companies that made the biggest purchases from 2005 to 2008 lagged behind industry peers two years later, according to data compiled by Bloomberg’s ranking group. Among the worst performers were McClatchy Co., Boston Scientific Corp., and Sprint Nextel Corp., all three of which are now valued at less than the price they paid for their acquisitions.

Companies struck $10 trillion of deals during the last merger binge, even after more than a decade of research showing deals often don’t pay off for the buyers. The average stock price of all the top acquirers trailed benchmark indexes by an average of about 3 percentage points.

I’ve written a fair amount about how difficult it is to acquire successfully (see Great Shareholder Ripoff, Why M&A Deals Go Bad, Dumbfounded by the Data, and The Complexity of Strategic Acquisitions). That notwithstanding, what never ceases to amaze me is that although we know, and have known for quite some time, that deals generally under perform and that most fail, we continue to repeat our mistakes.

Are managers incapable of learning, …or are the incentives to acquire so perverse that they just cannot resist??

A wonderful chart courtesy of the Council on Foreign Relations depicting what I described several weeks ago: Since announcing its renewed commitment to currency flexibility in the days leading up to the G20 summit, the appreciation of the yuan has been more symbolic than substantive…

click on the chart for a crisper image, or visit China’s Head Fake

As I wrote several weeks ago (see Currency Manipulator):

China’s strategy of publicly announcing a more flexible yuan policy in the days leading up to the G20 summit effectively deflected the debate away from the yuan. What’s more, China’s announcement was seemingly rewarded by a Treasury now more reticent to label it a currency manipulator.

The interesting thing to me about the whole thing is that the yuan has barely budged since the announcement, rising less than 1% since late June. For a currency that some claim is undervalued by as much as 40%, that’s not likely to make much of a dent in persistent trade imbalances.

According to the CFR

In the run-up to the June G20 summit in Toronto, China came under significant U.S. pressure to loosen its currency peg to the dollar…Then one week before the summit, China announced that it would relax the peg, and indeed the renminbi (RMB) began to rise. The political tension dissipated. Yet since July 2^nd, five days after the summit, the RMB has ceased rising.

Taking stock then, China’s most recent flexible yuan policy announcement seems to have been wildly successful. It quelled political criticism. It effectively avoided having the yuan become a topic of discussion at the G20 meetings. And it was rewarded by both the Treasury and the IMF, neither of which labeled it a currency manipulator in post-G20 currency assessments – opting instead for the much more benign label “undervalued” (see the Treasury’s Interim Report on Exchange Rate Policy and IMF Yuan Debate).

So in effect, China’s cheap talk has worked, …so far. The nagging question for US policymakers: Now what??