Merger mania has run amok. The profiles of various industry sectors are being redrawn almost weekly, as the ink dries on one multibillion-dollar mega-deal after another.
No sooner does Clariant AG tie up with Ciba Specialty Chemicals AG than Chrysler Corp. officially becomes DaimlerChrysler AG, and Exxon Corp. reveals it and Mobil Corp. will become the world's biggest company, period.
Amidst all this activity, America Online gobbles up Netscape Communications Inc., and Deutsche Bank AG swallows Banker's Trust Corp. to form the world's largest bank.
Meanwhile, in a deal with major implications in the global packaging industry, Germany's Viag AG (and its Schmalbach-Lubeca unit) merges with Switzerland's Alusuisse Lonza Group (and its Lawson Mardon Wheaton operations), and France's Total SA announces it will pay a steep premium to buy Belgium's Petrofina SA for nearly $13 billion.
And all this happened in just the past month.
What global recession? What economic uncertainty? Obviously, officials in boardrooms around the world sense that timing and circumstances are right to form alliances that they hope will secure their firms' places at the global table. This is especially true in Europe, where the imminent launch of the common euro currency is likely to ratchet up cross-border competition.
But is bigger really better? Many deal makers think so, and brazenly have staked their careers — and, more importantly, their companies' futures — on it. As always, however, the market ultimately will decide.
Some of the recent merger moves appear to be grounded in indisputable logic, such as a combined AOL/Netscape teaming up with Sun Microsystems Inc. to compete on more equal terms with perceived techno-bully Microsoft Corp.
On the other hand, the European stock market's lukewarm responses to the Total-Petrofina and Viag-AL Group deals, for example, reveal some skepticism about those partners' claims of obvious ``synergies'' and huge cost savings.
What many big firms still fail to adequately assess prior to committing to such mergers is how well the corporate cultures will mix. This factor can be every bit as important as expert analysis of a target company's balance sheet, and alone has sunk many a supposed marriage made in (investor) heaven. It will be fascinating, therefore, to look back on these many recent deals in, say, 18-36 months' time, to see who got it right and who made the billion-dollar blunders.
It is true that girth, clout and critical mass have become prerequisites to compete at certain levels in the global arena. But it also is worth noting that such mergers also reinforce the need for niche players — the types of private, independent companies that make up so many plastics processors, mold makers, resin compounders, distributors and the like. As long as they are alert and well-managed, these ``little guys'' will make a healthy living serving customers that will never even make it onto the radar screens of these new, steroid-fed corporate titans.
Is bigger better? Some nimble, smaller firms may find that, for them, it actually is.