A strategic purchase is one where a company overpays; a Transformational Deal is one where its directors admit they would prefer to be running something different. Last week’s TD, if it comes off, would transform Pace, the world’s largest maker of set-top boxes, into, well, definitely the world’s largest maker of set-top boxes.

Google wants to slough off the accidentally-acquired box business of Motorola for up to $2.5bn. Pace is keen, but with a market value of £600m at supension, can’t afford it without loads of debt, a whacking share issue and (quite possibly) leaving a minority stake with Google. Transformational? You bet. A good idea? Well, let’s say it’s better than trying to balance your Pace set-top box on top of your flat-screen tv.

This is the problem with set-top boxes. The tv makers keep eating the innards of the boxes, making the boxes themselves redundant. Pace and its competitors – now including the formidable Samsung – have to keep re-inventing the innards. To be fair to Pace, its new management team is doing better than the last one, and chairman Allan Leighton has charmed Pace’s biggest shareholder into positive thinking on the deal.

Unfortunately, those analysts who are not muzzled by the M&A payday their banks can see coming are not transformed. “Betting it all on red” – sell, said Canaccord. “Two drunks walk into a bar…” said Numis. To be fair, Mike Pulli, Pace’s Leighton-appointed CEO, once worked for the Motorola business, so he should know what’s in the box.

Pace’s recond might charitably be described as mixed, so you can hardly blame Messrs Leighton and Pulli for using this  upswing to seize a chance which won’t recur. But a year ago their strategy saw few economies of scale, so for this deal to fly, they must convince us that their boxes are part of the home comms revolution, rather than a leftover from the cathode ray tv. Now, where’s that damn SCART cable?

Get rich, tax free

You want to break away with a few mates and set up on your own . You’d rather not pay 28per cent capital gains tax on the value you’re confident you can create and now, thanks to Generous George, you won’t have to. In return for everyone signing away their employment rights, your group will be able to become “employee shareholders”, and any gains arising on the first £50,000-worth of shares will be tax-free.

This tax break, which popped up in last March’s Pastie Budget, is so daft that we expected it to die of shame. We were wrong. It’s in the Autumn Statement, and like so much that gushes from the Treasury nowadays (try the 80-pager on the taxation of high-value homes held by companies) the wonks have not a clue about what this wizard wheeze will unleash.

As the Institute for Fiscal Studies spotted, the Office of Budget Responsibility reckons the cost could balloon to £1bn. This is not because millions of happy, rightless workers will be singing all the way to the bank, but because a few clever boys in the City will set themselves up to become very rich indeed, tax-free. In beteen his crackdowns on “unfair” avoidance, is this really what our dear chancellor intends?

RPI RIP (reprise)

First the Central Statistical Office tortures the Retail Prices Index until it confesses it’s been overstating inflation (submissions for clemency are now closed) and now the government itself is suggesting that a little more inflation would be good for us. It may be hard to see what more the Bank of England could do to encourage it, except formally to abandon its 2per cent target in favour of “more emphasis on growth” or some such.

In truth, inflation never really went away. Our decade of flat prices in the shops was thanks to Hu He, the Chinese knicker-maker, while we fooled ourselves into thinking that house price inflation wasn’t like the other kind. We also fooled ourselves into thinking that borrow-and-spend equalled sustainable economic growth. We’re now fooling ourselves into believing that changing the rules for the BoE will somehow magically restore rising prosperity. It won’t, but it will mean more inflation, even measured on the new, cut-down RPI.

This is an updated version of my column in Saturday’s FT

http://www.ft.com/cms/s/0/8dff350a-45dc-11e2-b780-00144feabdc0.html#axzz2FIbl9ihb

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