Merger And Acquisition Mania Continues

They may wed willingly like Lucent and Alcatel, or it might be a forced marriage, as in the hostile bid by Mittal Steel for Arcelor. But whatever the circumstances, mergers and acquisitions continue to be highly fashionable.

"The wave of mergers has continued at full steam at the start of 2006," according to financial data provider Thomson Financial. Its latest report shows that the number of mergers and acquisitions announced -- but not necessarily completed -- in the world in the first quarter of the year leapt by 44.9% compared to the same period of 2005, reaching a value of more than US$880 billion (725 billion euros).

The most active sectors were energy and telecoms.

The biggest three -- none of which has been completed as of yet -- were German energy giant E.ON's 29.1-billion-euro hostile bid for Spanish gas group Gas Natural, Gaz de France's 44.7-billion-euro merger with French utilities group Suez, and Mittal Steel's 18.6-billion-euro hostile bid for Arcelor.

Another major move came last week when French telecoms technology provider Alcatel and U.S. rival Lucent Technologies announced a merger, creating a $33 billion giant in global telecommunications.

Analysts say that the vogue for mergers and acquisitions is the result of various factors. After the excesses at the end of the last millennium, companies had to slim down to strengthen finances. These efforts are now paying off and many big companies are cash-rich and eager to enlarge. This impulse has been encouraged by low interest rates. Stock markets have welcomed mergers, with the share price of the target company usually rising and, sometimes, that of the buyer too.

Copyright Agence France-Presse, 2006

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