NEW YORK -- Increased competition and the rush to be global could make 1999 the fifth consecutive record year for mergers and acquisitions -- exceeding the $2.5 trillion of announced transactions in 1998.
More agreements like Daimler Benz AG's $34.8 billion purchase of Chrysler Corp. and SBC Communications Inc.'s purchase of Ameritech Corp. for $83.6 billion are expected as companies forge links to cut costs and compete worldwide.
The blurring of borders in Europe, where 11 countries are adopting a single currency, will also create the need for companies with the bulk to serve a market as big as the United States.
"Consolidation in industries to achieve economies of scale and globalization are driving activity," said Gary Parr, who co-heads the mergers and acquisitions practice at Morgan Stanley Dean Witter & Co. "A number of industries are still highly fragmented and not very global. That would lead us to think that there is a lot more to come."
Eight of the 10 biggest mergers ever were announced in 1998, spanning industries from oil and cars to banks and telephones. Topping the list was Exxon Corp.'s plan to buy Mobil Corp. for $80.9 billion. The value of all mergers announced rose about 50 percent from 1997.
"1998 proved there really is no company that cannot participate in a merger in this market," said Morton Pierce, who heads the mergers and acquisitions practice at Dewey Ballantine LLP, a New York law firm. "Assuming the market stays stable, you should see the same thing" in 1999.
Goldman, Sachs & Co. led investment banks advising on mergers and acquisitions for the second year with 339 transactions worth $959.8 billion.
Merrill Lynch & Co. followed with 328 transactions worth $633.2 billion and Morgan Stanley Dean Witter & Co. was third with 371 transactions worth $621.8 billion, according to Securities Data Co. of Newark, N.J. Fees for Wall Street lawyers and bankers from these transactions could exceed $5 billion, analysts and bankers said.
Financial services, telecommunications and energy were the most active industries for consolidation. NationsBank bought BankAmerica for $42.8 billion and Travelers Group Inc. merged with Citicorp in a $37.4 billion transaction.
In telecommunications, Bell Atlantic Corp. said it will buy GTE Corp. for $82.7 billion and AT&T; Corp. agreed to pay $52.9 billion for Telecommunications Inc.
Straddling continents were Deutsche Bank AG's proposed buyout of Bankers Trust Corp. for $10.1 billion and British Petroleum PLC's acquisition of Amoco Corp. for $62 billion.
Bankers expect the same industries to top the charts in 1999, joined by oil and gas service companies, electric utilities and computer-related companies.
"There is going to be a lot more in the utilities," said Robert Kindler, a partner at Cravath Swaine & Moore. "The utilities are like the banks were a few years ago" in their need for consolidation.
Eastern Utilities Associates, which supplies electricity in Massachusetts and Rhode Island, said Dec. 8 that it hired Salomon Smith Barney Inc. as an adviser on potential acquisitions or a sale of the company. Enron Corp. has said it received bids for its Enron Oil and Gas Co. unit.
In technology, MCI WorldCom Inc. is accepting bids for its Systemhouse computer services division and General Instrument Corp., the No. 1 U.S. maker of cable TV set-top boxes, is in talks on a joint venture or a sale, according to people familiar with the companies.
Advisers also expect 1998's flurry in Europe to accelerate as 11 countries adopt a common currency today. Highlighting 1998 were the mergers of drugmakers Astracix AB of Sweden and the Britain's Zeneca Group PLC, and electronic equipment manufacturer Siebe PLC's 4.2 billion pound ($6.9 billion) purchase of industrial goods manufacturer BTR PLC.
Drugmakers, banks and insurance companies are expected to be among the leaders in European mergers in 1999 as they combine to expand sales on the continent.
Also expected to be active are European aerospace and defense companies.
General Electric Co. PLC, Britain's second-largest defense contractor, will try to merge its aerospace and military businesses with a defense company. Possible partners include British Aerospace PLC and Northrop Grumman Corp., analysts say.
Pub Date: 1/01/99
DATELINE: NEW YORK