Olivetti, a failed Italian typewriter maker reincarnated as a communications firm, stuns Europe's stock markets with a dramatic, $65 billion offer to take over Telecom Italia, a telephone behemoth seven times its size. A cozy merger between Societe Generale and Paribas, two of France's leading banks, is thrown into disarray when a rival Paris financial house proposes to swallow them both. A battle for control of Italian fashion giant Gucci turns venomous when a French billionaire proclaims that he has snatched the company from the clutches of a rival French raider.
For Americans who have long since grown used to the dog-eat-dog world of hostile corporate takeovers, none of this sounds new. But for Europeans, the ground is shaking. A bare three months into 1999, the first year of Europe's single currency, the pace of deal making is already fevered. According to statistics compiled by Securities Data/Thomson Financial by the end of the first quarter of 1999, merger activity involving European companies has reached $345 billion, up from $145 billion in the same period last year.
To be sure, many of the takeovers could be considered friendly, such as British Aerospace's $12.8 billion purchase of the Marconi defense business from General Electric Co. of Britain. But European business also seems to be playing by a set of new and bloodthirsty rules. In a clean break with the clubby, amicable deal making of the past, a new breed of European corporate strategist is talking the North American lingo of hostile takeovers, poison pills and white knights, and behaving accordingly. Even some of the friendlier activity reflects the dominance of America's hardball tactics.
It's not surprising that many of the new deals have an American feel: Europe's latest merger boom is being shaped by armies of pinstriped investment bankers jetting in from Wall Street. In fact, two banks based in New York City, Morgan Stanley and Goldman Sachs, overtook their European rivals for the first time in 1998 and became the top two advisers for takeovers in Europe in terms of the value of deals they helped bring about, according to Securities Data/Thomson Financial. "I believe there's going to be a lot more hostile activity," predicts Wilder Fulford, a managing director for mergers and acquisitions at U.S. investment bank Salomon Smith Barney in London. "You have a fair number of corporate cowboys out there in the European landscape, and I think there is going to be quite a roundup."
The driving forces of the merger wave are globalization and Europe's new single currency. Globalization has forced companies to compare their performance with other firms, in their business worldwide. Drug companies, for example, have to compare development and production costs whether they are based in Sweden, France or the U.S. The result: executives slash costs, by combining overlapping operations.