THIS week Lord Hanson announced the end of his 30-year personal mission to build a world-beating company by bringing together dozens of unrelated businesses under one banner.
Ending months of speculation about the £10 billion company's next move, Lord Hanson, 74, said he would dismember his empire, splitting it into four distinct businesses. The City called it the death knell of the conglomerate.
Ten years ago the demise of Hanson was unthinkable. Its hostile bids for London Brick, typewriters - tochemicals conglomerate SCM and tobacco - and food group Imperial had earned it a reputation as an unstoppable leviathan. The conglomerate looked like the shape of things to come.
Now the old Hanson model looks increasingly outdated. Last month Lonrho's reforming chief executive Dieter Bock said he would spin off the group's mining activities into a separate company. Lonrho-Africa is expected to go its own way soon.
Williams Holdings, another big buyer in the 1980s, has settled down to three core businesses - security, fire protection and building products. even BTR, whose products range from batteries to golf balls, has restructured itself into five discrete divisions.
Critics claim the companies which grew up and thrived in the corporate machismo of the last decade have lost their way in the changed climate of the 1990s.
Not so, say Hansons closest peers, Greg Hutchings of Tomkins, Norman Ireland of BTR and Nigel Rudd of Williams Holdings. There is life left in the conglomerate, they say, albeit in a different form.
They are all rather prickly about the names people give them. They run from the labels "conglomerate" and the clumsy tag "diversified industrials".
Mr Ireland recalls: "At the last Stock Exchange classification change, which booted us in with Hanson, we fought like hell to keep out of that classification."
Mr Rudd, chairman of Williams Holdings, is cautious when the word conglomerate comes up. "I don't see it as a term of abuse," he says warily, "but I'd rather we were known as an international manufacturing company." Mr Hutchings, former protege of Lord Hanson who now chairs Tomkins, a maker of hand uns and lawnmowers, also wants a separate manufacturing category.
Deftly avoiding the word conglomerate, he says: "Whether we manufacture cakes or bicycles doesn't matter. The management systems, management styles and financial controls in a company like Tomkins ΓÇôare applicable for each business.
While Mr Ireland says BTR is trying to "emphasise the inter-relationship" between its businesses and Mr Rudd is proud of Williams's new-found focus, the old-style conglomerate, which made no attempt to find any logic other than a financial one between its operations, still has its admirers.
Another Hanson emigre, Chris Miller, is now chief executive of WassaIl, the £5OOm group which covers cable television, office furniture and bottle tops. He says other conglomerates have run into trouble not because of their diversity but because "when you get to a certain size it becomes difficult to find that earnings-enhancing deal any more."
His argument is supported by analysts and by Hanson itself. Derek Bonham, Hanson's chief executive, implies that the company has become a victim of its former success.
After spending £2.5 billion on eastern Group last year only to see the company's shares decline, he says Hanson's board acknowledged it had simply run out of things to buy which would make a big enough difference to its future profits.
Analysts say the companies which grew through daring corporate raids are now suffering in another way from the acquisitive habits of Hanson's founders, Lord Hanson and the late Lord White. Their success was based in part on the failure of the market to spot the true value of companies under its nose. But as their success grew, so the market grew wiser. "Towards the end of the 1980s," Mr Rudd says, "the market got better at spotting hidden value and investors behind the scenes became more vociferous in pushing for value."
Mr Miller adds: "Hanson and BTR woke everybody up to what could be done with old-fashioned, out-of-date manufacturing companies."
THE climate has changed in other ways, analysts say. The first generation of conglomerates such as Thomas Tilling, which were broken up and replaced by the likes of Hanson and BTR, relied on the logic that big is beautiful and diversity means balance.
A loose assembly of companies in different markets, the argument went, would insure the parent group against the vagaries of economic cycles and allow it to keep its tax burden down by offsetting capital-intensive operations against cash-generative ones. That consensus has been replaced by a new buzzword - "focus" - invoked by the likes of ICI in its 1993 decision to split off Zeneca and by Lonrho's Mr Bock. American conglomerates have given momentum to the trend.
Telephones-to-Twinkie bar group ITT, telecommunications giant AT&T and photography-to-household goods.combine Eastman Kodak lead the list of parent companies which spun off businesses or split up completely last year.
Mr Hutchings says stripping down is not the only way for broadly spread companies to go forward. "There is a big future for focused companies, and focused companies can well have a broad range of products as long as they are united by something else, such as Tomkins' manufacturing theme," he says.
Nevertheless, investors tend to reward conglomerates which make a move towards simplicity. Paul Gibbs, of banker J P Morgan, has looked at how large companies' shares perform after they shed noncore businesses or diversify. He concludes that "clarifying firms" typically outperform "diversifying firms" by almost 15pc.
Similar research was called on by Forte's advisers in their defence against Granada's £3.8 billion takeover bid. There was no doubt in the Forte camp that conglomerate was a dirty word.
They threw it at Granada, claiming that with interests spanning television production and catering it had become nothing more than "a 1980s-style, acquisition driven conglomerate." Conglomerates, they said, had fallen 35pc behind the stock market since 1990.
Granada made no attempt to defend the conglomerate, protesting that it was a coherent leisure group.
While conglomerates have been falling from fashion, many of the young men who created them have grown old. Demerging his empire is expected to be Lord Hanson's last corporate achievement before he retires next year.
Gavin Launder, of SBC Warburg, says: "In American conglomerates that have failed there is a pattern of the autocratic founder disappearing, from the scene and leaving it to be run by managers. It tends to be the next generation which splits it up."
Mr Rudd agrees: "A conglomerate only really lasts the lifetime of the person who created it Once that person goes it is taken over by the nomenclature, who are just very good bureaucrats.
He and Mr Ireland agree that over conglomerates need leaders who are strong enough to make the decisions on what to buy and how to expand, but BTR's chairman says: "I am not a strong-man supporter."
Even founder Sir Owen Green saw the need for teamwork, he says: "When Owen was the driving force in the company he recognised other directors were contributors to his thinking." That balance cannot be created by corporate governance codes imposed blindly from outside, he adds.
With or without autocratic leadership, Mr Miller insists conglomerates have a future as long as they recognise "that there is such a thing as a size problem". He has told investors that if WassaIl starts getting too big it will not decide to focus on three or four operations.
Instead, he would rather shrink the business again, either by following Hanson's demerger example or selling businesses and giving shareholders the proceeds.
I picked up a 1970s American magazine called Acquisitions Monthly recently," Mr Miller recalls: "That said conglomerates were clearly out of fashion. They'll come back."
