As Mergers Roar Ahead, Experts See Record Year
Corporate mergers have roared ahead in the first days of the second quarter, prompting Wall Street experts to predict another record year for mergers and acquisitions.
Although some merger specialists previously doubted that 1996 could top 1995’s record, the blockbuster pace seen in the year’s first three months has quieted the cynics.
“We’re in a cycle where absolutely everyone is convinced that bigger is better,” said Mort Pierce, an attorney specializing in mergers at the law firm of Dewey Ballantine.
The second quarter began with a bang on Monday when three blockbuster deals were announced within a few hours of each other.
They were SBC Communications Inc.’s $23.8-billion acquisition of Pacific Telesis Group, including assumption of debt; Aetna Life and Casualty Co.’s purchase of U.S. Healthcare Inc. for $8.9 billion; and Allegheny Ludlum Corp.’s $3.2-billion pact to buy Teledyne Inc.
More deals are expected, especially in the telecommunications sector, where recent federal legislation has broken down barriers to corporate combinations.
“The pace is as heavy as it was last year. It might even be heavier, especially in the large deal area,” said Don Smith, merger expert at Los Angeles-based investment bank Houlihan, Lokey, Howard & Zukin Inc.
Widespread market rumors this week also surrounded Bally Entertainment Corp., which was viewed as a possible acquisition target of Hilton Hotels Corp. or ITT Sheraton Corp. The three companies have declined comment.
The burst of merger activity this week came even as Wall Street was assessing record first-quarter data. Although they calculate the figures differently, two firms that track merger data reported that the value of transactions again set records.
Deals valued at more than $109.2 billion were announced in the quarter, blowing past the first-quarter record of $88 billion set in 1988, according to Securities Data Co.
Houlihan Lokey, which tracks merger data through its Mergerstat Review, estimated that first-quarter transactions rose 48% from 1995’s first quarter to $81.3 billion.
