Periscope

By Foroohar, Rana | Newsweek International, February 21, 2005 | Go to article overview

Periscope


Foroohar, Rana, Newsweek International


Byline: Rana Foroohar, Zahid Hussain, Sudip Mazumdar, Ron Moreau, Mark Hosenball, Tamara Lipper, Fred Guterl, Mark Starr, John Sparks, Marie Valla, David Ansen, Bret Begun, Ginanne Brownell

The big deals are back. Companies are enjoying their biggest buying sprees in four years. In recent weeks, megadeals like Procter & Gamble's $52 billion acquisition of Gillette have made headlines. A study by Robert W. Baird and Co., a U.S. investment bank, shows a 52.7 percent jump in the value of global mergers and aquisitions deals from 2003 to 2004. Now, there's even buzz that merger mania is coming to Europe. Last week, speculation helped push the FTSE to the 5,000 mark.

European bankers shouldn't raise their glasses just yet. European M&A did rise last year, with the largest deal being Banco Santander's $15 billion acquisition of Britain's Abbey National Bank. But the actual number of transactions fell by nearly 1 percent. What's more, many experts say the fundamentals don't support a European M&A boom at this point. (European growth is sluggish and interest rates are rising.)

The deals currently underway don't match the buzz. European countries have consolidated internally--all that's left are much trickier cross-border mergers. And companies looking to do those deals are under pressure from politicians who don't want to lose their national champions. Analysts say European companies may also be gun-shy, having suffered disproportionately after the last M&A bubble in 2000 .

It's not all gloom and doom, though. Many experts expect a moderate pickup by the second half of 2005. The big U.S. deals of late may also prompt European sector leaders to re-evaluate their own positions. After the Proctor & Gamble bid, many analysts have been speculating on how Unilever, the troubled Anglo-Dutch consumer-goods giant, will respond. So far, it's not with a merger. In fact, newly appointed CEO Patrick Cescau said last week that he needed to "get the company working with what it has" before making any new purchases. With European corporate profitability continuing to lag behind the United States, his continental counterparts would do well to follow a similar strategy.

--Rana Foroohar

India-Pakistan Relations: Getting Back on Track

When indian Foreign Minister Natwar Singh travels to Islamabad this week, he'll have his work cut out for him. Last September the fledgling peace process between India and Pakistan seemed about to take off. Pakistani President Pervez Musharraf and Indian Prime Minister Manmohan Singh pledged to explore "all possible options for a peaceful, negotiated settlement" of their serious differences, including the disputed territory of Kashmir. But since then, "there have been several steps backward," says a senior Pakistani Foreign Ministry official.

Islamabad complains that no headway has been made on the simplest issues, let alone Kashmir. Proposed bus service between the capitals of divided Kashmir is trapped in a dispute over travel documents. A trans-Pakistan pipeline that would carry natural gas from Iran to India is bogged down in trade issues. Pakistan has even gone to the World Bank for arbitration over a dam that New Delhi is building on the Indus River. "India is not serious in resolving the issue," says Pakistani Foreign Minister Mian Khurshid Mahmud Kasuri. India counters that Pakistan has been dragging its feet on normalizing border trade.

Fortunately both sides still seem deeply committed to peace. In addition to Natwar Singh's trip this week, the Indian prime minister has accepted an invitation to visit the Pakistani capital next month. If progress is to be made it will clearly have to come from the very top.

--Zahid Hussain, Sudip Mazumdar and Ron Moreau

U.S. Affairs: Help Wanted

The search for a new director of National Intelligence in the United States continues. Two of the names most frequently mentioned as hot candidates for the intel-czar job are both members of the WMD commission set up by Bush a year ago to study U.

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