On May 7, 1998, Jurgen Schrempp announced the merger of Daimler and Chrysler, a deal he described as a “marriage made in heaven”. On Valentine’s Day nearly nine years later, Dieter Zetsche, Mr Schrempp’s successor as chairman of DaimlerChrysler, signalled that the perfect union looks set for a break-up.

For the company has radically changed its language on Chrysler. A year ago, it said Chrysler was not for sale. Yesterday, Mr Zetsche cleared the way to dispose of the business: “We do not exclude any option to find the best solution for both the Chrysler Group and DaimlerChrysler.”

The Zetsche statement, accompanied by a plan to cut 13,000 jobs and close a plant in Delaware, constitutes an admission that the DaimlerChrysler merger has been a failure.

As such, it comes as a timely reminder of the dangers of mergers and acquisitions. The world is in the throes of another M&A boom. Nearly $4 trillion (£2.05 trillion) worth of deals were done in 2006. This time around, the hope is that chief executives will be more prudent in what they pay and more conscientious in truly combining the businesses.

McKinsey, the management consultants, issued a report last year arguing that M&A is not destroying as much value as it used to. By comparison with the 1997-2000 M&A boom, the last three years of deals has involved less value destruction for the acquirers and marginally less overpayment. Cash buys, rather than paper deals, have been particularly rewarding.

The DaimlerChrysler experience, however, demonstrates that the difficulties of global combinations goes well beyond price and terms of payment. The real deal is combining the businesses.

DaimlerChrysler has failed because the industrial marriage has never been fully consummated. Mercedes has purred along; Chrysler has stalled: the US car manufacturer dragged down the group’s earnings by reporting a $1.5 billion loss for 2006.

The US group combined with a European one, but Chrysler never really ventured abroad: 90 per cent of its sales remain in the US. Chrysler has also been asleep to the slowdown in demand for its main products: pickup trucks, sports utility vehicles and minivans. These vehicles account for 70 per cent of Chrysler’s output, even though high fuel prices have been driving US consumers towards smaller, more efficient cars.

The company now faces a choice. Either it can fully integrate the Chrysler business with the Mercedes unit and, finally, exploit the benefits of this marriage, or it can pursue a complete separation. Odds on, it’s splittsville.

Credibility of EMI’s top act

Last month, when EMI issued a profit warning and ousted the chief executive of its recorded music business, it was argued here that Eric Nicoli, the man in charge of the company since 1999, should take responsibility for the recurring disappointments and resign.

Yesterday, Mr Nicoli issued another profit warning, blaming the collapse in CD sales in the US that will result in a 15 per cent fall in recorded music revenues.

EMI shares fell 12 per cent. Institutional shareholders muttered darkly about managerial incompetence, exasperated that the management failed to foresee the problems in the US when it issued the last profit warning a month ago. Private equity firms, which had toyed with an offer at 320p a share late last year, laughed at the idea of a bid even now shares are trading at 210p. The market for credit default swaps signalled a deterioration in credit quality. And analysts forecast that the dividend will have to be cut.

To be fair, this problem, like so many others in EMI over the years, is not directly Mr Nicoli’s fault. The iPod has helped to destroy physical sales of music. The “unprecedented decline” in CD sales has hit music companies across the board: Warner Music shares also slipped 9 per cent yesterday.

There may even be some good news in this dismal announcement. The pressures on the industry must surely make it harder for the European Commission to stand in the way of the deal that needs to be done between Warner and EMI.

However, EMI has serious problems. It has long underperformed in the US. It has failed to deliver the roster of multimillion-selling stars that it promised. (Admittedly, it was Alain Levy, the man whom Mr Nicoli hired and then fired, who made that commitment.) And it is struggling to make its way in the digital age. Today, Mr Nicoli has even less credibility with which to address these problems than he did yesterday. It is now up to John Gildersleeve, the EMI chairman, to make the case for retaining him.

Cash on tap

Wolseley epitomises the old addage that where’s the muck, there’s brass. Laying claim to being the world’s largest supplier of plumbing parts may not sound glamorous but it has allowed Wolseley investors to enjoy years of double digit dividend rises. In the year to July the dividend rose 11 per cent as pretax profits were up 22 per cent to £817 million.

So, there should be no surprise that Cinven, the private equity group, was sounded out on the possibility of a £10 billion bid for the business. Sure enough, Wolseley is expensive (notwithstanding the fact that the shares slipped back this year over worries that it is overexposed to the slowing US market for new housing.)

But private equity firms like businesses with a reliable revenue stream, better still backed by property assets. Wolseley certainly has the former and is bound to have unrealised value in its storage depots and warehouses.

Private equity has got increasingly ambitious, bidding for airlines such as Qantas and pursuing supermarket operators like Sainsbury’s. By comparison, Wolseley is an unadventurous target. That will be its appeal — there may be plenty more muck to come.

- Goldilocks is back. Ben Bernanke, the Fed Chairman, offered a neither too hot, nor too cold assessment of the outlook for the US economy. He told Congress yesterday that the threats of price rises still outweigh the concerns about slowing growth, but that over time he foresees a “gradual ebbing of core inflation”. The tightening bias will stay in place, but US interest rates look set to hold steady at 5.25 per cent.

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