CBS Chairman Laurence Tisch stunned the business world last week by announcing he was abandoning his plan to merge with QVC, the hot home shopping network.
Yet a day later, retailers Macy and Federated said they would merge, creating the most formidable department store chain in America. Eli Lilly & Co. also said last week that it would pay $4 billion for PCS Health Systems.
These events underscore a trend taking shape in the U.S. economy as a different kind of merger wave accelerates, driven by a changing economy. While some highly publicized mergers have fallen through, many others are going forward, often with much less fanfare but with no less importance for the U.S. economy.
Whether the fallout from the heightened merger activity will be viewed positively or negatively in the near-term -- on Wall Street and on Main Street -- is as yet unclear.
While the American public is increasingly convinced that the economy is getting better, the rising wave of mergers points to another major round of job cuts on the horizon, economists warn.
At the same time, U.S. companies' urge to expand via acquisitions is bolstering the competitive advantage that corporate America enjoys over foreign rivals, many analysts contend.
That could spur a dramatic increase in foreign bids for U.S. businesses, as overseas companies seek to harness U.S. know-how -- and at cheap prices, given the sharp decline in the dollar's value this year.
For now, the recent acceleration of the takeover boom that began last year is largely domestically driven and encompasses a wide spectrum of the economy -- from retailing to telecommunications to health care.
Just last week, for instance:
* Retail giants R. H. Macy & Co. and Federated Department Stores agreed to merge in a $4.1 billion deal.
* Two leading providers of wireless communications services, Nextel Communications and OneComm Corp., said they will combine in a deal worth $650 million.
* Drug titan Eli Lilly agreed to pay McKesson Corp. $4 billion for its PCS Health Systems division, which manages the dispensing of drugs for a large number of corporate benefit plans.
All told, the value of domestic mergers announced this year already totals $131.6 billion, up from $105.5 billion at this point a year ago, according to deal-tracker Securities Data Co. in Newark, N.J.
The number of deals announced so far this year is 3,843, up from 3,179 a year ago, Securities Data said.
With half the year to go, the 1994 merger tally has nearly surpassed the full-year total of $136.8 billion in 1991 -- the low point for takeover activity after the economic and banking crises 1990 put a temporary end to corporate consolidation, following the wild deal days of the late 1980s.
Analysts say the motivation behind the merger explosion of the '90s is vastly different from that of the '80s. The latter half of the last decade was an era of deals often done for financial reasons: Companies were bought by professional takeover artists, most of whom simply broke up their targets and sold off the pieces for a quick return.
Now, most deals are between consenting companies that see material gains in productivity and competitive critical mass in joining, said Guy Wyser-Pratte, a New York investment banker and veteran of the '80s merger era.
"Almost all of the deals you're seeing today are for strategic reasons," he said.
The strengthening economy only adds to the urgency many companies feel to combine, experts say. As business opportunities expand, so too does the corporate view that the smartest strategic move is to quickly boost market share and thus derive a bigger earnings boost from the economy's growth.
What's more, the merger movement is being abetted by the ample availability of bank financing, as banks step up their lending again.
And ironically, the stock market's overall decline this year has effectively lowered the prices of many desirable corporate targets, as their stocks' prices have slumped.
From a company's standpoint, "The best time to buy is when people are selling," said Frank Baxter, head of Jefferies Group, a Los Angeles-based brokerage and investment banking firm.
But while many Wall Streeters are preaching the merits of mergers, investors -- and the public -- may be growing more skeptical about the supposed benefits.
In the race to develop the "information highway," for example, some of the key merger deals announced among telephone, cable TV and entertainment companies last year have since been called off.
The blame for the deals' unraveling was largely placed on investors, who pushed down the prices of many of the stocks involved in apparent rejection of the marriages.
In part, buyers' stocks in merger deals often fall for technical reasons related to the transactions, especially in cases where shares are being exchanged.
Still, investors' unwillingness to embrace some of this year's big deals may reflect fears that the transactions haven't been well-enough thought out, said Sharon Kalin, a takeover-stock trader at Athene-Coronado Capital in New York.
Meanwhile, the public's (and employees') reaction to rising takeover activity may also turn increasingly negative, some economists say.
The reason: The end result of nearly all corporate mergers is a substantial loss of jobs, as the combined company inevitably streamlines itself and eliminates duplicated departments.