When you attend a baseball game in the United States, one of the ritualistic sounds that greets you as you enter the ballpark is something along the lines of: “Scorecards! Get your scorecards here! You can’t tell the players without a scorecard!” When you succumb to the vendor’s pitch and get your scorecard, you find that you can understand and follow the game better. The reason I bring this up is that for some companies, you really do need a scorecard to understand the current composition and operations of the company. This is because the operating units that comprise the business today may not be the same as they were two or three years ago.
I am speaking here of companies that regularly engage in the acquisition and divestiture of businesses. Not all companies fall into this category, as many companies grow primarily through organic growth. However if you have ever tried to understand the income and balance sheets of companies that frequently buy and sell parts of their businesses, you know that it is very helpful to have a cheat sheet detailing what occurred when. Otherwise you can find yourself looking at a year when revenues rose 25%, assets grew by 15% and debt took an exponential jump with no clear explanation at hand. It can be a very frustrating experience. For such companies, a listing by year of the major acquisitions and divestitures engaged in by the company can go a long way towards helping the diligent investor understand the company’s past performance. Such a listing can also offer other insights, as it can show the astute investor where the company is choosing to expand and cut back.
There doesn’t seem to be a standard spot for listing companies bought and sold. ENI, the Italian energy company, places their listing within the strategy section, while Tyco chooses to discuss the topic in its history section. Both approaches are set out below. As long as an intelligent investor can find the information, I think that is all we can reasonably ask for.
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