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But while such run-ups are easy to spot, the source of possible leaks is devilishly hard to trace. Any of the dozens of lawyers, bankers and investment advisers who work on deals can pass information along to colleagues, friends and relatives. A secretary who types a prospectus or contract can do the same. It may thus be virtually impossible to keep news from seeping out once a raider begins lining up financing for a deal, or two firms start talking merger.
Nonetheless, regulators still seek to gain greater control over confidential information. Gary Lynch, enforcement director of the Securities and Exchange Commission, worries about what he calls "an unsettling proliferation of rumor activity in the marketplace." Says Lynch: "We have opened an unusually large number of investigations recently." Last week the SEC and two exchanges were studying the sudden jump in RCA stock before the merger announcement.
Insider trading is about the only aspect of the merger marathon that bothers the Reagan Justice Department. Just a decade ago, a proposed joining of two leviathans like GE and RCA would have drawn an immediate challenge. But under the benign gaze of the Reagan White House, bigger most often means better. Charles Rule, Deputy Assistant Attorney General in the antitrust division, notes that recent years have brought "a sea change in public opinion regarding the costs and benefits of regulation," including antitrust laws. Says Rule: "After years of experience with the Great Society, we discovered that more Government doesn't make society all that great. Indeed, it often makes it worse."
Congress talks about curbing some of the merger activity, but it has not taken any action. While some 50 bills to regulate acquisitions were introduced in 1985, none has made it out of committee. Complains Wirth, who tried and failed a year ago to restrict some takeover practices: "The economic ideologues at the White House are dominating what debate there is within the Administration, and they believe the market can do no wrong."
Nonetheless, some officials are taking measures to slow down or control the corporate wheeling and dealing. The Federal Reserve Board has been concerned about the financial impact of consolidations and is seeking to make it tougher to float junk bonds. Under a ruling likely to take effect in January, the Fed would limit the size of many junk-bond issues to 50% of the amount offered for a company. The move could cause a slowdown in takeovers and buyouts, at least until ingenious Wall Street moneymen devise new methods of raising funds.
The New York State legislature last week passed a bill that will also raise barriers to unwanted takeovers. Under it managers of New York-based companies could block hostile moves for up to five years. Said Governor Mario Cuomo, who has announced that he will sign the legislation: "This will definitely slow down some hostile takeovers. Our experience has been that while some takeovers are designed to create a more efficient organization, many others are just rip-offs."