Decline in Merger Activity Is Misleading, Experts Say

If you go by the numbers, U.S. mergers and acquisitions fell sharply in the first quarter of 1989 compared to the frenzy of last year, but experts say the figures are misleading and the outlook for more takeovers is good.

“I don’t see this as anything but a fluctuation,” said Louis Lowenstein, professor of corporate finance at Columbia University’s School of Law. “Nothing fundamental has changed.”

The numbers--at least on the surface--indicate that merger activity slowed from January through March. Mergers and corporate transactions announced during the first quarter fell to 340 from 410 in the same period of 1988, according to statistics compiled by Securities Data Co., a Newark, N.J., research firm.

The transactions include recapitalizations and stock buybacks.

The dollar value of the deals also plunged, to $74.36 billion in the latest quarter from $137.17 billion a year earlier, Securities Data said.

But the people who follow merger activity attach little significance to the figures.

‘Simply Cyclical Activity’

“It’s much too short a period from which to draw any conclusions,” said Isaac Shapiro, a partner in the law firm Skadden Arps Slate Meagher & Flom, which has a large practice in mergers and acquisitions.

“I don’t think quarter-to-quarter statistics mean a lot,” Shapiro said.

Donald Margotta, an assistant professor at Northeastern University in Boston, agreed, saying, “It’s not significant enough.”

“It’s simply cyclical activity,” Margotta said. “Mergers have gone through cycles--there are lows and there are peaks.”

Furthermore, there’s no reason for merger activity to fall off, the professor said.

“The basic forces driving the market are still there,” Lowenstein said.