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Mergers are rewriting the very language of American business. In the heat of a takeover battle, a "white knight" may be summoned to buy a company and rescue it from a corporate raider. Or the target may swallow a "poison pill" by taking on a huge load of debt or some other obligation that makes it less attractive. Nearly every company has by now spread "shark repellent" to ward off would-be attackers. Such protection may take the form of requiring a 75% vote of shareholders to approve a merger or of buying back a company's stock to boost its price. Even mighty Exxon, the world's largest industrial company, with annual sales of more than $90 billion, has bought more than $4 billion of its own stock since 1983 in order to ward off sharks. If all else fails, a desperate firm may resort to a "lockup" agreement, which calls for the company to sell some of its most valuable assets to a white knight for an enticingly low price.
The consolidation binge is far more than simply a business phenomenon. The mergers and takeovers are reaching deep into the daily lives of individuals, families and communities. Acquisitions often mean layoffs and shifting of corporate headquarters. Employees who keep their jobs can find themselves working for new bosses and performing unfamiliar duties. There is almost always a clash of corporate cultures when two firms get together, before they / learn each other's ways. Just the transfer of executives from one town to another can have a hurtful impact. Says Donald Henry, a Connecticut lawyer who watched last January when Canada's Belzberg family acquired Scovill Inc. and later sold its Waterbury offices: "The senior people who staff a headquarters are also leaders in their community, which suffers a severe shock when they depart." Change is an integral part of business life, but much of recent merger action seems to be just disruptive motion rather than movement toward better-run companies.
The billion-dollar megadeal is no longer just an American phenomenon. In recent months it has spread abroad, where it was once virtually unknown. In Britain, Argyll, a fast-growing food and supermarket company, launched a $2.8 billion takeover bid this month for Distillers, the Scottish liquor giant whose products include Johnnie Walker whisky and Gordon's gin. On the same day, Imperial Group, another British firm, agreed to acquire United Biscuits for $1.9 billion in a merger that will create a consumer-products concern with annual sales of about $10 billion. In Japan, U.S.-based Trafalgar Holdings and a British partner have launched a $1.4 billion takeover bid for Minebea, a manufacturing conglomerate, in an effort to become the first outsiders to acquire a Japanese firm.
Gargantuan combinations are basically creations of the 1980s. Though it seems hard to believe amid today's merger-a-minute mania, only twelve transactions valued at more than $1 billion took place between American firms from 1969 to 1980. In 1985, by contrast, the pace has been torrid: companies have agreed to more than 30 deals worth at least $1 billion, according to Martin Sikora, editor of Mergers & Acquisitions, a quarterly publication that tracks consolidations. He adds, "There were more deals than ever in the $5 billion category."