Market mayhem hits mega-mergers

Traders are reportedly targeting shares of companies engaged in mergers, which have dropped significantly since US stock markets reopened on Monday.

Hewlett Packard, which proposes to buy Compaq in a $20bn mega-merger, has been particularly hit, seeing its share price fall by more than 10 per cent to $16.20 compared with an overall decline on Nasdaq of less than eight per cent.

Investors are speculating that the disruption to the markets of the past week could cause proposed mergers to collapse, according to the Financial Times.

Another potential merger, between Cendant and airline reservation group Galileo, has seen both firms' shares fall heavily, while Spanish telco Telefonica last week cancelled its merger with Brazillian firm CRT.

Berkshire Hathaway, the investment vehicle for Warren Buffett, one of the world's richest men, also pulled out of a $500m take-over deal last week.

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