A few more mergers and acquisitions this week could topple a record $335 billion for deals in 1988. So far, $332 billion in deals have been completed or announced this year.
"This has been a fabulous year for deals," says Martin Sikora, publisher of Mergers & Acquisitions magazine.
Still, the M&A environment is a lot different than in 1988, when leveraged-buyout firms orchestrated many deals to reap huge profits on banking and investment fees.
"Deals are more rationale; there aren't as many takeover battles and you don't see corporate raiders," says Greg Zuckerman, editor of Mergers & Acquisitions newsletter. Most of the deals have been valued at less than $3 billion each.
Fueling activity:
-- Strategic buying. Defense, health care, telecommunications and financial services companies are the most prolific merger candidates.
Defense contractors are buying rivals to capture a bigger piece of a shrinking business - a prime reason Northrop paid $2.2 billion for Grumman.
Pressure to cut consumer medical costs has pushed health care firms together. Telecommunications firms are scrambling to keep up with changing technology to get on the information highway.
-- The quest for growth. Recession-inspired restructurings and layoffs swept corporate America in the early '90s. "Companies have already cut costs to the bone. The only way to boost earnings is through acquisitions," Sikora says. He expects retailers, food processors and consumer-products marketers - intensely competitive sectors - to be hot merger candidates in '95.
-- Foreign buyers. Acquisitions of U.S. companies by foreign companies nearly tripled this year to 16% of deals vs. 5.9% in 1993, according to research firm Securities Data. The trend is likely to continue as foreign economies rebound. The cheaper dollar also attracts foreign suitors.
But LBO specialists which made their mark in the '80s, such as Kohlberg Kravis Roberts, may become a bigger part of future M&A activity. "LBO firms are learning to be strategic too, buying a company and adding on acquisitions in the same area," Zuckerman says.
