Mergers, megamergers and empire-building corporate weddings are
back in vogue on Wall Street.
Almost every day, there is news of some new billion-dollar
combination: banking, healthcare, and tobacco in just the past few
Behind the new surge in acquisitions is a much healthier stock
market. Since the beginning of the year, stock prices are up between
15 and 20 percent. This has given companies the means to snap up
competitors - some weakened by an economic downturn.
The furious dealmaking is part of a larger trend in American
business life: the consolidation of whole industries. National
companies snap up regional companies, with Bank of America buying
Fleet Bank this week for $43 billion in stock. Rivals join forces to
take on bigger fish - such as RJ Reynolds buying Brown &
Williamson's tobacco division this week to compete against Altria's
Philip Morris brands. Chief executives play chess with their
Call it the Supersizing of America.
"I think it's largely driven by the economies of scale inherent
in global communications and systems," says Don Straszheim of
Straszheim Global Advisors in Los Angeles.
It's not hard for Americans to find examples of this
consolidation in their own lives. Four packers sell over 70 percent
of all the beef bought in the US. Only two companies in the world
make commercial jets. Three wholesalers control over 90 percent of
the distribution of drugs. Three companies control almost 80 percent
of the confectionary market.
The increased consolidation has prompted fairly intense antitrust
reviews in Washington, says Jon Dubrow, an anti-trust partner at
McDermott, Will & Emery in Washington. "They don't look at size. Big
is not necessarily bad," says Mr. Dubrow. "The question is who will
remain to constrain the company after the merger," says Dubrow, who
says the Bush administration is as aggressive on antitrust as the
Despite fewer competitors, many experts dismiss fears of monopoly
control. "Most of the time, new competitors pop up," says David
Wyld, a business professor at Southeast Louisiana University.
FOR example, today only a handful of grocery stores distribute
most food. Yet 15 years ago, a new competitor entered the business -
Wal-Mart. Today, the Bentonville, Ark., chain sells 19 percent of
the groceries bought in the US.
"What has happened is that consolidation has led to incredible
competition," says Adam Fein, president of Pembroke Consulting in
Philadelphia. "Wal-Mart is now considering selling groceries in
California, and the retailers there are figuring out how to