The $20 billion Softbank-Sprint deal shows that the Great Recession had little ultimate effect on either magnates' caution or their egos, writes MoneyShow's Howard R. Gold, also of The Independent Agenda.

Remember the great old days of M&A? The days when marquee CEOs with egos the size of Alaska lit up the TV screens with their latest game-changing deals? And when breathless reporters walked away with arms full of awards and fat book contracts for chronicling every twist and turn?

That, of course, was before some of the most spectacular deals came crashing down to earth. Exhibit A, B, and C: AOL-Time Warner (AOL), which was to mergers and acquisitions what Gigli or Showgirls were to movies.

But just when you thought those halcyon days were over, Japan’s Softbank announced it would take control of Sprint Nextel (S), a perennial money loser that ranks a distant third among US wireless carriers behind Verizon (VZ) and AT&T (T).

Unveiled last week in Tokyo by Softbank’s billionaire chairman Masayoshi Son and Sprint’s CEO Daniel Hesse, the complex deal would cost Softbank $20 billion in borrowed money and still leave it with only 70% control; the rest of Sprint’s stock would be publicly traded. It would be the biggest purchase ever of a US company by a Japanese-based firm, topping the 1989 landmark acquisition of Rockefeller Center by Mitsubishi Estate.

The money would help Sprint pay off a mountain of debt and gear up for war against the wireless giants. Son views this as a disruptive merger modeled after his own challenge to the duopoly atop Japanese telecom through his 2006 acquisition of Vodafone Japan.

Son is a true maverick, the grandson of immigrant Korean pig farmers who became an entrepreneur when he studied at UC Berkeley.

“Taking up a challenge always entails a big risk,” he said. And in a subsequent interview, he added: “If I didn’t have any interesting strategy, I wouldn’t bet $20 billion.”

This bravado was so familiar I decided to look into what makes some mergers work while others fail—and what it means for investors. So, I contacted Robert Bruner, dean of the Darden School of Business at the University of Virginia and author of the aptly named 2005 book, Deals from Hell.

“Failure pervades business, and most firms fail eventually,” he wrote—but M&A is generally not a loser’s game. In fact, Bruner found that on average, mergers and acquisitions do just about as well as any corporate investment.
But some mergers are better than others.

“The best deals are pretty focused—in adjacent areas,” he told me. “The value destroyers tend to wholly unrelated areas.”

In other words, when companies go too far afield, they’re asking for trouble.

That’s also true geographically. Foreign bidders pay more than domestic ones, he said, helping investors in US target companies, but not necessarily the acquirers.

Indeed, Bloomberg BusinessWeek reported that the ten biggest overseas acquisitions by Japanese companies from 2000 to 2011 led to a horrendous 26-trillion-yen ($330 billion) loss of market value within 12 months.

NEXT: Bigger Isn’t Better

Tickers Mentioned: Tickers: S, T, VZ, AOL