The Urge to Merge Returns
Friday 23rd January 2004 - 2:45pm - 4:00pm
The Urge to Merge Returns
Annual Meeting 2004
The year 2003 saw US$ 1.3 trillion in M&A transaction volume, up 9% from 2002, but far lower than the peak of US$ 4 trillion in 2000. Juergen Dunsch, Senior Economics Editor, Frankfurter Allgemeine Zeitung, Germany, engaged the panellists on their views of the outlook for 2004.
Mario Monti, Commissioner, Competition, European Commission, Brussels, said he expects considerably more cross border M&A activity, despite mixed indicators. He also remarked that estimates based on filing fees with the anti trust department predict cross border M&A activity could rise as much as 50% in 2004.
Monti advised that some members of the European Commission want to expand the oversight of mergers in order to force CEOs to examine their operations more closely and to make vigilant decisions. "I ve met a few CEOs who have confessed happiness with a merger not going through," he remarked. He added that he does not believe that merger control should be used to favour European companies, and he resists pressures to interpret competition policy as part of industrial policy.
Peter A. Weinberg, Chief Executive Officer, Goldman Sachs International, United Kingdom, said that from what he hears in the CEO community and among chief investment officers of the world s largest funds, he feels confident that merger activity is returning to its previous levels. "They want to see value created with the right mergers," he said, "which is different from last year." Weinberg said he doesn t feel that there will be a 50% increase in the market. He explained that he expects to see more in country acquisitions of smaller companies rather than huge deals.
Gregory J. Fleming, Executive Vice President and President, Global Markets and Investment Banking, Merrill Lynch & Co., USA, said he thinks a return to the "frenzy" of the nineties is unlikely. He pointed out that historically an upturn in M&A activity tends to follow an upturn in economic indicators. Fleming added that CEOs are looking to mergers and acquisitions as a driver of top line growth, explaining that they are likely to occur in mature industries like financial services, pharmaceuticals, energy and power where top line growth is a challenge.
Kenneth J. Costa, Vice Chairman, UBS Investment Bank, United Kingdom, agreed that there are likely to be consolidation mergers in the pharmaceutical and financial services sectors. He was more optimistic about reaching 50% growth across the globe. He added that it is likely M&A activities will be better received in the market than the largely paper driven deals of the past. Costa also suggested that the most successful M&A activities tend to be those that are hostile, because they must be well prepared.
"I m hearing hostile, hostile. I prefer unsolicited, " said Travis Engen, President and Chief Executive Officer, Alcan, Canada. "A deal can be unsolicited and friendly." Referring to his company s unsolicited offer for Pechiney, which he said was "not at all unfriendly", he added that "if you re going to make an unsolicited offer you re going to check and double check, because there s risk." Elaborating on Costa s earlier comments, Engen described a "town hall" meeting with the top 50 Pechiney managers, immediately after a merger had gone through. According to Engen, one third of the managers had already engaged in discussions with Alcan managers.
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Peter A. Weinberg
Founding Partner, Perella Weinberg Partners, USA
1979, BA, Claremont McKenna College; 1983, MBA, Harvard. 1983-88, with Morgan Stanley, New York. 198...
Senator, Senate of Italy, Italy
Studies at Bocconi University and Yale University. Formerly, Professor of Economics and Rector, Bocc...