Boom in Business Mergers
Recent Record-Size Mergers and Rulings
On Jan. 8, the Justice Department announced it was ending the two biggest antitrust actions in American history, the suits against American Telephone & Telegraph (AT&T)—the world's largest company—and International Business Machines (IBM), the giant computer manufacturer. The announcements came just one day after news of the second-biggest merger in American history, U.S. Steel's takeover of Marathon Oil, and less than six months after the country's largest merger ever—the acquisition of Conoco by Du Pont. The Du PontConoco takeover helped make 1981 a record year in a merger wave that began to sweep the country in the mid-1970s, and if the latest news is any indication, 1982 could end up breaking all previous highs.
Economic analysts disagree about the scope, the importance and the implications of the current merger wave, but most agree that the growing popularity of corporate takeovers is an unexpected and bewildering phenomenon. At a time when business executives and individual investors have expressed pessimism about the U.S. economy corporations have been buying each other up as though the future could bring nothing but prosperity and profits. The nation's most prestigious brokerages and investment houses have been helping corporate executives plan acquisition campaigns, and the country's biggest commercial banks have been willing to stake billions on the outcome of merger fights.
A number of factors contribute to the takeover mania: inflation, windfall profits, changes in bank legislation, a new trend in Supreme Court decisions, certain abiding features of the U.S. tax system and some new tax breaks enacted by the Reagan administration. Not least has been a degree of uncertainty about President Reagan's antitrust policies. Eager to find out how far they would be allowed to go, corporate directors put the administration's antitrust officials to some tough tests in 1981, most notably in the two big merger battles for control of Conoco and Marathon.