Setting the Sights For Super-Deals: Escalating Purchase Prices Drove Values

Of Public Targets to Nearly $275 Billion In 1997, all transactions in the Top 100 list of completed deals were priced at $1 billion or more for the second straight year. The cutoff point rose from $1 billion in 1996 to nearly $1.3 billion in 1997. And the number of completed m&a transactions priced at $1 billion or more last year rose to 143 from 113 in 1996. That kind of upsurge in megadeals inevitably points to a healthy increase in acquisitions of publicly owned targets, which usually offer the size not to mention the market capitalization that commands top-tier prices. Indeed, as acquisition prices jumped and bigger targets were in greater demand, a record number of public companies were purchased in 1997, even though they continued to represent only a fraction of all acquirees nailed down during the latest full year. The heftier impact on the m&a statistics, however, was in dollar value, where publicly traded targets took a majority share of the confirmed volume. The number of public targets reached 569 in 1997, up 10.7% from the 514 the year before. That exactly matched the increase in total completions for the entire m&a market. But the dollar value for public targets, in the clearest reflection of the bifurcated trends, surged to $429.2 billion from 284.6 billion, an astounding 50.7% rise that dwarfed the 20.5% market-wide increase. And while public targets comprised only 7.3% of all acquired businesses in 1997 roughly one in 14 the collective purchase prices they fetched was 54.2% of the total confirmed dollar value. Helping power this remarkable showing was the fact that 17 of the 20 highest-priced deals involved publicly traded targets with prices in this group alone ranging from nearly $5 billion to more than $21 billion. With most of the corporate behemoths listed on the New York Stock Exchange, it was not surprising that Big Board-listed targets contributed mightily to the numbers and flashed big gains in both numbers and dollar value. The number of NYSE companies picked off was up a strong 45% to 132 from 91. But in one of the biggest manifestations of the super-deal era, aggregate purchase prices passed $274 billion to register an astounding 79% rise from the already lofty $153.2 billion level of 1996. Big Board-listed targets were on the sell side in the six highest-priced transactions of 1997 and took seven of the top 10 slots. As a result, targets that had been trading on the NYSE captured a 63.9% share of all acquisition currencies expended for public companies and 34.7% of the confirmed total of m&a dollar value for the year. The next most-prolific source of targets was Nasdaq, which surrendered 288 companies to acquirers, up 16.1% from 1996 levels. That was accompanied by a steeper 37% rise in dollar value to a record $127.9 billion from $93.3 billion the year before. Two Nasdaq-traded targets both banks took slots in the 10 highest-priced deals of 1997 and two others were in the top 15. The irony is that these figures soon will be smashed assuming all of the eye-popping super-deals unveiled in early 1997 get done before the year ends. Acquisitions of Publicly Held Companies by Trading Market 1997 1996 No. of Value No. of Value Deals ($ bil) Deals ($ bil)New York Stock Exchange 132 $274.4 91 $153.2American Stock Exchange 36 8.7 51 18.4Nasdaq 288 127.9 248 93.3Over-the-Counter 95 17.5 104 9.2Pink Sheets 5 0.22 12 10.4Nasdaq Small-Cap Issues 13 0.51 8 0.14Total 569 429.23 514 284.64<\TBL>