Scott Moeller, a former senior investment banker at Morgan Stanley and Deutsche Bank, has a surprise in store for students at London’s Cass Business School.

Moeller, now a professor at Cass, teaches the mergers-and-acquisitions (M&A) section of the school’s prestigious Master of Business Administration course.

The surprise comes on the first day in the classroom. Rather than singing the praises of the “deal” — a thing idolised by most executives as glamorous and glorious, the summit of business life — Moeller shows a simple slide. Its title: Most Acquisitions are Failures. “With all the hype, I often think that there is a misimpression among students that these deals are always good for shareholders and other stakeholders,” he said.

Time and again academic and business studies show that acquisitions do not create value, but destroy it, and that the people who carry the can for these mistakes are almost always the shareholders of the company doing the buying.

Moeller’s slide should be made required reading for company directors. Despite all the evidence that takeovers are bad news, 2005 will go down in history as the year the deal came back to Britain — and with a vengeance.

After three quiet years, M&A activity has built up steadily over the past 18 months and last week the dam broke. Four big takeovers involving UK companies with a combined stock-market value of £23 billion were announced. The largest, a takeover by Spain’s Telefonica of the mobile-phone company O2, will at £17.7 billion be the second-largest cash deal the world has ever seen.

If they are all completed, 2005 could rival 2000 — the final year of the dotcom boom and the previous highwater mark for world stock markets — as the biggest ever year for takeovers in Britain. So far this year, deals worth £120 billion have been announced, compared with 2000’s total of £174 billion.

The drive for deals has been turbocharged by several factors working in unison. Share prices have recovered, giving companies more confidence and allowing emboldened chief executives to dust off longnurtured plans to expand their empires through acquisition.

Top merchant bankers, often the inspiration behind ambitious takeovers, said there was a “me-too” effect at work also; once one deal is done in a sector, others will follow as companies react to the new competitive landscape. “M&A always goes in cycles, and we are now smack in the middle of a big one,” said one senior banker.

But the big driving force, executives and bankers agree, is the abundance of cheap money available to fuel the deal machine. According to some estimates, investment funds around the world have $46,000 billion to invest, and are all jostling to find the best return. Low interest rates mean that investments in equities now look attractive, particularly those that offer steady yields at rates twice the cost of the borrowing required to buy them.

But it is far from certain that the lessons of past failure have been learnt. Professor Alan Gregory of the Centre for Finance and Investment at the University of Exeter is, like Moeller, sceptical about such deals. He completed a survey last year of large takeovers made between 1977 and 1994. It concluded that in the five years after a deal, the total return on investment underperformed by an average of 26% against shares in similar companies of comparable size.

He and Moeller are working on studies of the recent wave of deals, to see if they have broken the mould. Gregory is pessimistic. “I can’t see anything different this time around,” he said.

SIR DAVID ARCULUS, chairman of O2, arrived back in London last Wednesday morning. A director of Barclays, he had flown overnight from South Africa after a board meeting there to mark the high-street bank’s recent purchase of Absa, a South African bank group.

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