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Saturday, Aug. 1, 1998
Hostile takeovers becoming thing of the past
More of today's megadeals treat participants as equals
By ERIC R. QUINONES
Associated PressThe merger boom is becoming a love fest.
The hostile takeovers that defined the 1980s are hardly heard of anymore and big deals are increasingly being cast as ``mergers of equals'' where both chief executives get to keep their jobs and Corporate America's drastic makeover gets a friendlier face.
Many of this year's megadeals, including this week's Bell Atlantic-GTE marriage, have put up at least a facade of equality.
``The problem with acquisitions is that there's always somebody that wins and somebody that loses from a psychological standpoint,'' said Gary Miller, president of Aragon Consulting Group Inc. in St. Louis. ``A merger of equals tends to give the illusion that nobody loses, everybody wins.''
A peaceful merger could also help get a deal past monopoly regulators who get anxious at the prospect of one company being swallowed whole by an acquisitive behemoth.
In that vein, mergers of equals are likely to continue growing as the furious combinations in telecommunications, financial services and other industries leave fewer players and each successive deal raises more competitive concerns.
Of the 10 biggest mergers announced this year, seven have included plans for bosses from both sides to retain top executive posts. They include the two biggest deals ever, the $77.9 billion Travelers Group-Citicorp merger and the $62.8 billion marriage of NationsBank and BankAmerica.
Especially in such huge combinations, it can be beneficial to have as many experienced executives as possible to oversee the joining of two companies. But the potential for conflict is great when two people used to being in charge have to co-exist.
Just this week, shared-management tension bubbled over at Cendant, the New Jersey-based product of a merger last year between discount services provider CUC International Inc. and hospitality company HFS Inc.
Former CUC head Walter Forbes resigned as Cendant chairman under pressure from the board because of accounting fraud at businesses he once led. Forbes blamed chief executive Henry Silverman for his dismissal, saying the former HFS boss had been trying to wrest control of Cendant from him since the merger.
``I think from a management perspective it's probably inherently unstable, so I would expect to see those (shared-power) situations change,'' said Ken Hodge, a vice president at Mercer Management Consulting in Lexington, Mass. ``I think they're transitional structures.''
Despite the potential power clashes, investors have embraced big mergers of equals - as long as their stock holdings continue to get richer.
GTE is among the few megamerger players whose stock has suffered. Its shares have fallen sharply since Tuesday after management accepted less than the market value from Bell Atlantic, which will keep GTE boss Charles Lee as chairman and co-CEO.
Premiums paid to shareholders in mergers - still high, but shrinking for the past three years - could diminish further if more executives sacrifice price to retain power in mergers of equals.
The growing shared-power deals exemplify the extreme shift in mergers and acquisitions since the 1980s, when corporate raiders hunted for juicy paydays through hostile takeovers.
By the mid '90s, buyers sought efficiency and used their soaring stock prices to pay competitors handsomely to hand over control of their businesses. A few hostile takeovers surfaced - most notably Wells Fargo's $11.3 billion purchase of First Interstate in 1996 - but most deals agreeably left one side in charge of a bigger empire, while the other walked away richer.
Now as the merger stakes are raised with each passing month, leaders of sought-after companies can apply more pressure on suitors to keep a chair open in the executive suite, said Hodge of Mercer Management.
``Failure to resolve the who's-in-charge issue literally could break the deal,'' he said.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web