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‘98 Merger Mania Adds Up to Record $945.5 Billion

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From Reuters

The strongest currents propelling world commerce--including new technologies, robust equity markets and globalization--converged in the first six months of 1998 to drive the biggest merger wave in history.

There were a record $945.5 billion in U.S. deals, based on preliminary figures, topping the $920 billion in mergers for all of 1997, according to Securities Data Co.

Of the 10 largest corporate deals ever assembled, eight were announced in 1998’s first half, driven by the urgency to exploit deregulation and crumbling economic borders, and to extend earnings growth to support towering stock prices, deal makers said.

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The experts said the pace is expected to continue through the balance of the year, barring an equities slump or rise in interest rates. The emphasis will continue to be on the telecommunications and financial industries, joined by insurance, the next industry ripe for big-deal consolidation, they said.

The deal volume of the first half accelerated in the last three months, when two of the largest mergers ever were announced in quick succession. In early April, Citicorp and Travelers Group Inc. unveiled their $72.56-billion tie-up, followed one week later by NationsBank’s $61.63-billion combination with BankAmerica Corp.

“It is breathtaking. It is clear that the first six months will be more than 1997 in total. That obviously is skewed by some of these big deals, but that is phenomenal. It is a classic struggle between scope and scale versus focus, and scale obviously prevailing in the marketplace today,” said Robert Profusek, head of the mergers-and-acquisitions law practice at Jones, Day, Reavis & Pogue in New York.

Meredith Brown, head of the mergers-and-acquisitions group at Debevoise & Plimpton, a New York law firm, said, “It is hard to get investment bankers to focus on a mere $1-billion transaction. That used to be a big deal.”

As for high stock prices, the currency of choice for mergers and acquisitions, Brown said stock has climbed to 90% of deal consideration, “an amazing reversal of where things were 10 years ago, when the majority of the aggregate consideration would have been cash.”

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