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Quite a few of Wall Street's more powerful mergermakers now concede that some rescued companies might have been better off with the hostile raider, which had at least studied its quarry and knew its own intentions. In contrast, white knights have little time for arming themselves and can sometimes fall victim to decisions made in haste. Occidental's negotiations for Cities Service, for example, took just nine days. Other deals have been set in motion on the basis of a quick telephone call from one chairman to another. As one Wall Street investment banker puts it, "How can anyone be expected to investigate all the ramifications of a $1 billion or $2 billion commitment in such a short time?"
About 15 years ago hostile takeovers, and hence white knights, were rare. A hostile takeover was like "spitting on the floor," says Martin Lipton,* a Wall Street lawyer who specializes in mergers and acquisitions. "It just was not done." Hostility has prevailed, though, in the newest round of mergers that started about two years ago when Kennecott Corp. sold out to Standard Oil Co. of Ohio shortly after a takeover bid by Curtiss-Wright.
More and more marriages have been encouraged by depressed stock prices and banks that seem almost eager to lend potfuls of money for mergers. In all, corporations have spent $258 billion since 1978 to gobble each other up, instead of pumping that money into research or modernizing existing plants.
Allied's relationship with Bendix has only just begun, but it shows little promise of being sunny. Allied faces the daunting task, as Harvard Business School Professor Robert Hayes puts it, of "assimilating a dispirited conglomeration of auto parts, aerospace and machine tool businesses into its own conglomeration of chemicals, plastics, oil, gas and electrical businesses."
Allied's Hennessy says his company should benefit in the long run from Bendix's strengths, particularly in aerospace technology. But the price was high. Allied wound up paying $2.3 billion for all of Bendix and 38% of Martin Marietta. The deal enriched Bendix shareholders, who saw the price of then-holdings jump 61% during the tussle. But it saddled Allied with a $2 billion debt, which it will have to pay off by selling some of its own assets and others that came with Bendix. Among the possible candidates: Bendix's large RCA holdings. Meanwhile Allied's stock has suffered. Instead of rebounding with the powerful market surge that started in August, Allied's shares sold at about $34 last week, down slightly from three months ago.
There is also the problem of meshing Bendix's executives with Allied's, a chore that claimed its first victim within hours of last week's meetings. Bendix President Alonzo L. McDonald Jr., 54, was forced out of his $725,000-a-year post as the company's No. 2 man behind Bill Agee.