ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Wednesday, January 1, 1997 TAG: 9701020049
SECTION: BUSINESS PAGE: B-8 EDITION: HOLIDAY
DATELINE: NEW YORK
SOURCE: Associated Press
To say 1996 was a big year for mergers would be an understatement. Companies combined with a stunning vigor, almost doubling the amount spent during the peak years of the go-go '80s.
Deals announced in 1996 totaled $658.8 billion, up from a record $519 billion in U.S. mergers the year before, according to Securities Data Co., which compiles such figures. That's enough to pay about $2,500 to every man, woman and child in the United States.
The busiest area for dealmakers was telecommunications, which saw the rules of competition turned upside down with deregulation. The four biggest combinations of the year involved telephone companies, totaling about $73 billion.
They were: Bell Atlantic's proposed merger with Nynex ($21.3 billion); British Telecom's bid for MCI ($21.3 billion); SBC Communications' offer for Pacific Telesis ($16.5 billion); and WorldCom's purchase of MFS Communications ($13.6 billion).
With such momentum, don't expect the merger and acquisition game to cool any time soon.
``One thing that happens in M&A is that when you have major changes in one industry, the other companies that weren't involved have to react,'' said Ken Tuchman, co-head of mergers and acquisitions at Lehman Brothers Inc. ``And that creates a ripple effect.''
Mergers were undertaken largely for ``strategic'' reasons in 1996, meaning companies combined to position themselves better against growing global competition. That stands in some contrast to the 1980s, when deals were often done simply to make money and run.
Outside forces like deregulation turn corporate strategy upside-down, and thus drive dealmaking. Telecom mergers, for example, exploded in 1996, rising to $104 billion from $24.1 billion the year before.
Other big areas were utilities, with more than $41 billion in deals, followed by radio and television broadcasting, which boasted more than $37 billion in combinations. On Tuesday, Westinghouse announced it had completed its purchase of Infinity Broadcasting ($4.7 billion).
If it seems like there's been a recent flurry of merger activity, there has. Securities Data said the final quarter of 1996 saw $201.7 billion in deals announced, second only to the third quarter of 1995.
Boeing's mid-December announcement that it is buying McDonnell Douglas ($13.3 billion) helped cap the frenzied year. Also in the quarter, in early November to be exact, British Telecom said it would buy MCI.
The 1980s-like activity seen at year-end had to do as much with deal size as frequency. In that respect, 1996 was stunning.
More than 100 deals were announced worth $1 billion or more. The year's Top 10 deals were worth more than $132 billion, about 20 percent of the total merger value. Of course, the deals came as the stock market rose to record levels, making companies more expensive.
Prior to 1995, the record merger year as calculated by Securities Data was 1988, with a total of $353 billion. Activity tailed off and remained muted in the early 1990s, but has come on strong.
LENGTH: Medium: 64 lines KEYWORDS: YEAR 1996by CNB