View from City Road: Lesson to be learnt from Enterprise fiasco

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The Independent Online
What happens first in the US tends to come to Britain sooner or later, so it seems safe to assume that the merger boom gripping Wall Street will shortly be arriving in London. Already there has been a notable upturn in activity - albeit from extremely low levels - and investment bankers are alive with talk of big deals in the pipeline. Not that this means a return to the rip- roaring 1980s, when ego, management aggrandisement and financial engineering tended to be the guiding principles. That time is gone for good, or so everyone says. Believe it if you will. This time round the motivation is much more about globalisation, strategy, competition, and cost-cutting.

In the US activity has been strongest in pharmaceuticals, media, defence and financial services, where all these pressures have become intense. Merge or die is the rallying call, culminating in this week's astonishing dollars 8.5bn offer by American Home Products for American Cyanamid. According to Mergers and Acquisitions magazine, the value of transactions in the US during the first half of this year was up a fifth.

Besides the rash of TV mergers - which had their own peculiar dynamic - there has only been one big bid in Britain so far this year, Enterprise's pounds 1.5bn battle for Lasmo. Industrial logic was cited in this case too, but the market didn't buy it. If there is to be a new phase of strategic takeovers and mergers - the supermarket battle for the hand of William Low might suggest there is - the lesson of the Enterprise fiasco is that the case must be exceptionally well thought out and presented to succeed. Woolly thinking just will not do.

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