Jim Jubak: Big mergers and acquisitions can be dear to investors</title>

I call it destruction by acquisition.

Forget the synergies, the cost savings and the cross-selling that CEOs tout when they announce one of these deals.

Too many of the huge merger and acquisition deals struck in 2009 -- and that continue to be struck -- will take money out of shareholder pockets for years to come.

But some CEOs are so desperate for growth and so pessimistic that their companies can produce growth internally that they"re willing to mortgage the future for a deal that makes them look good now -- or at least allows them to disguise how bad things are. Those accounting tricks might work long enough for them to walk out the doors and cash out those options.

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Money can"t buy you love, but it can buy a CEO the semblance of revenue and earnings growth. (For a look at how hard it will be to find profits in this recovery, see this blog post.)Not every deal of 2009 and 2010 will destroy shareholder value. I"ll give you a few at the end of this column that might actually work out well for shareholders and discuss how to tell the difference between the good and the bad. But a high percentage of the deals that have earned the headlines and moved the stock market in the past year or so need to be seen for what they are: admissions of weakness in sectors desperate for growth.

Exxon Mobil (XOM, news, msgs) is buying XTO Energy (XTO, news, msgs) for $41 billion, including assumed debt. Kraft Foods (KFT, news, msgs) buys Cadbury (CBY, news, msgs) for $20 billion. Xerox (XRX, news, msgs) buys Affiliated Computer Services for $5.6 billion. Comcast (CMCSA, news, msgs) agrees to buy NBC Universal for $37 billion. Merck (MRK, news, msgs) buys Schering-Plough for $41 billion.

What"s striking about each one of these deals? They"re in sectors that are desperately seeking growth. Whither go Pfizer-Wyeth? Let"s just take the most obvious growth problem child, the biotech and pharmaceuticals sector. 2009 started off with Pfizer (PFE, news, msgs) buying Wyeth in January for $68 billion. And it culminated in the fourth quarter of 2009 with 78 deals.

The impetus for the Wyeth deal was the expiration of Pfizer"s patent on cholesterol medication Lipitor, the world"s best-selling drug, in November 2011. In 2009, Pfizer got $11.4 billion of its $50 billion in sales from that one drug. Wyeth"s products and pipeline of future products were purchased to help fill the gap that the expiration of the Lipitor patent would leave in Pfizer"s top and bottom lines.

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So a year after the Wyeth deal was announced, what"s Pfizer telling Wall Street about growth? The company reported 2009 earnings per share of $2.02. In 2010, the company projects, earnings per share will increase to $2.10 to $2.20 a share. That"s earnings growth of between 4% and 9%.

And after that? Well, in 2011, the company told analysts, it expects earnings per share of $2.25 to $2.35. That is, at worst, an increase in earnings of 2% from 2010 and, at best, growth of 12%. The Wall Street consensus pegs growth at a little less than 6% for 2011.

For that you pay $68 billion? Well, I guess so, when you have no idea of how to generate growth internally and the alternative is seeing the company flush billions in shareholder money down the drain on your watch.Deals big and small in the energy sector Or look at the energy sector. After a two-year slowdown in acquisitions, deal making is heating up again. The big deal has been Exxon Mobil"s purchase of XTO Energy, but there have been plenty of smaller deals, too -- although small is a relative term in the energy business. Schlumberger (SLB, news, msgs), for instance, just signed a deal to acquire Smith International (SII, news, msgs) for $11 billion.

Why?

Oil producers, especially the big international oil producers, have been locked out of the most promising opportunities for finding oil and natural gas. They don"t have much alternative to acquiring.

You can judge how tight a spot they"re in by the nature of recent deals. Exxon Mobil, Total (TOT, news, msgs), BP (BP, news, msgs), Royal Dutch Shell (RDS.A, news, msgs) and Statoil (STO, news, msgs) have all spent big recently to buy U.S. natural-gas or oil reserves. A decade ago, many of these companies couldn"t get out of the U.S. exploration and development market fast enough.

Locking up natural resources