Value of Merger Deals Hits Record High in First Half

A wave of billion-dollar buyouts in the first half of the year swept corporate mergers to a record level, the research firm W. T. Grimm & Co. said Monday.

The total value of acquisitions in the first six months of 1988 was the highest ever for a six-month period, at $129.4 billion, said Grimm, a subsidiary of Merrill Lynch & Co.

The merger-tracking firm said the next highest total was reached in 1985’s first half, when $100 billion worth of deals were made.

The total cost rose sharply from the 1987 period, when companies spent $91.3 billion buying each other.

Merger activity in general picked up sharply at the start of the year as the dust settled from last October’s stock market crash and a bargain-hunting buying spree began.

Analysts said other factors included the weakness of the dollar, which made American companies less expensive for foreigners, and the eagerness to complete deals before the end of the Reagan Administration, which has had a relaxed attitude toward antitrust enforcement.

The focus of the mergers was large-sized companies, Grimm said.

Average Size Rises

The total number of acquisitions rose relatively modestly to 1,155 from 1,031 in the year-earlier period, it said.

But the average size of the transactions rose at a faster pace, with 195 deals worth $100 million or more, compared to 166 in the 1987 first half.

Billion-dollar deals rose even faster. There were 30 such transactions set up, compared to 17 last year.

Reflecting the influence of the weaker dollar, Grimm said foreign buyers nearly doubled their buyouts to $31.3 billion from $16.8 billion in the first six months of 1987.

Foreign entities made 151 acquisitions, 13% of total transactions, compared to 99, or 9.6%, in the 1987 period.

Britain remained the most active country in the buying and selling of American companies, followed by Canada.

Most Involved Cash

Japanese corporations increased their activity, although they remained a relatively small part of the takeover picture and set up just 21 American buyouts in the first half of the year, compared to the prior year’s total of 15.

Grimm said divestitures, the sale of subsidiaries or operating companies, accounted for 34% of all acquisitions, down slightly from last year’s 37%.

Based on preliminary data on payment for the deals, Grimm said 55% of the mergers involved cash, up from 40% in 1987, when the booming stock market gave companies the ability to finance transactions more easily by offering equity.

The exchange of stock declined to 24% of the total from 31% in 1987. A combination of cash, stock and/or debt was used in 20% of the deals, down from 29% in 1987, Grimm said.