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Merger mania muscles back into the headlines
The merger and acquisition frenzy that started late last year in US financial circles revved up with the purchase of Gillette by Procter and Gamble, as well as negotiations between AT&T and SBC.
"There's already over 100 billion dollars in announced deals in January," said Richard Peterson, and experts on mergers and acquisitions at Thompson Financial.
"We were expecting a rise in merger and acquisitions but not two huge deals in January alone," said David Wyss, an economist with Standard and Poor's.
Telecommunications company SBC is involved in talks on buying AT&T, however no formal agreement was reached as of the end of the week.
But Procter and Gamble surprised everybody by announcing it was buying Gillette, the famous maker of razors, for 57 billion dollars, a merger that will result in the creation of the world's largest manufacturer of cosmetics and other consumer goods.
This is the thirteenth-largest merger ever negotiated in the United States and the biggest since JP Morgan purchased Bank One for 58 billion dollars a year ago, according to Peterson.
The January deals follow merger and acquisition activities in December, which saw 300 billion dollars worth of agreements designed to bind companies together.
The deals include those between Sprint and Nextel valued at 36 billion dollars, the purchase of Guidant by Johnson and Johnson for 23.9 billion, of Veritas by Symantec for 13.5 billion, and of PeopleSoft by Oracle for 10.3 billion dollars.
Overall, mergers and acquisitions valued at about 833 billion dollars were announced in the United States in 2004, according to Peterson, who projects that this year, the amount will reach one trillion dollars.
"The legal environment is very liberal, and after the reelection of George W. Bush merger and acquisition activity went through the roof," Peterson pointed out. "The market has removed uncertainty for the next four years."
In addition, US companies are sitting on mountains of cash, Wyss said.
The current level of mergers and acquisitions is, however, a far cry from the frenzy recorded in the late 1990s.
A record was set in 2000, the year when the dot-com bubble burst, when a total of nearly 1.7 trillion dollars in transactions was announced.
Analysts now believed that US conglomerate Colgate Palmolive, one of the leading competitors of Procter and Gamble, will go on the offensive to avoid being pushed to the sidelines.
The company may show interest in purchasing battery manufacturer Energizer because by acquiring Gillette, Procter and Gamble will also take possession of Duracell.
Brand names like France's Bic are being mentioned as well. It is a family-controlled company, but, according to Wyss, "everything can be bought at the right price."
Merger rumors are also circulating in other sectors of the economy. Peterson believes French telecommunications giant Alcatel may try to acquire Lucent Technologies, a US firm.
"There are several potential buyers for Lucent, Alcatel is one of them," confirmed Wyss, who also mentions Nortel. Chinese companies, according to Peterson, would like to buy oil company ConocoPhillips for more than 16 billion dollars. Heavyweights of the pharmaceutical sector could invest money in biotechnology firms in anticipation of profits from new drugs now under development.
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