The Big-Money Niche In the M&A Market Purchases of Publicly Held Target Firms Ran Faster Than All 1998 Dealmaking

Acquisitions of publicly traded companies outran the pace of the m&a market in general during 1998. Although they represented less than one in every 10 completed deals, public-target purchases reconfirmed their role as a powerhouse that helped expand the deal flow and, more significantly, drove aggregate prices to a record level north of a trillion dollars. The number of deals that snared publicly held targets reached 859 in 1998 from 715 the year before, for an increase of 20.1%. Total dealmaking in the m&a market rose only 12.2% to 9,149. However, the impact of public-company deals, which in the main are far larger than the market as a whole, was far stronger on dollar value. Total purchase prices for public targets surged 117.2% to $907.2 billion from $417.6 billion in 1997 compared with a market-wide gain of 72.1% to the record level of $1.32 billion in 1998. One result was that deals for public targets accounted for more than two-thirds of the confirmed dollar value logged for the m&a market in 1998 even though the base of completed transactions was rather narrow. Public deals took a whopping 68.6% of the market’s aggregate values, although they represented just 9.4% of all deals. That penetration must be interpreted from at least two different perceptions. Deals on average are getting pricier, and the largest acquisition candidates in the main are publicly traded firms. At the same time, at least part of the showing is attributable to the availability of more information than in other segments of the m&a market, such as acquisitions of private companies and divestitures in which the dealmakers often shroud the prices in secrecy because there may not be a legal requirement to provide full details. There is no such option with regard to public companies because full pricing and other details must be provided to shareholders of both concerns. One key sign of the power-drivers generated by increasing prices and expanding deal size was the action in acquiring companies listed on the New York Stock Exchange where megadeal-centered activity ran at even a quicker rate than for all public companies. The Big Board lost 174 companies to the m&a market in 1998, up 27.9% from the 136 deals notched the year before. But dollar value climbed even more sharply, reaching $627.8 billion for a surge of 122.5% from the 1997 level of $282.2 billion. Moreover, the dollar value pinned on Big Board targets took a 69.2% slice of the aggregate prices for all public targets in 1998, as well as a 47.5% of confirmed volume for the entire m&a market. Eighteen of the 20 highest-priced deals of 1998 involved targets listed on the Big Board or were mergers in which both sides had their stock traded in that arena. Activity also was brisk in acquisitions of companies traded on Nasdaq, where the targets tended to be smaller but more technologically advanced operations. The number of completions rose 14%. Acquisitions of Publicly Held Companies by Trading Market 1998 1997 No. of Value No. of Value Deals ($ bil) Deals ($ bil)New York Stock Exchange 174 $627.8 136 $282.2American Stock Exchange 39 11.9 36 8.7Nasdaq 340 200.5 307 130.7Over-the-Counter 101 10.8 106 18.0Pink Sheets 4 0.4 5 0.2Nasdaq Small-Cap 18 0.7 14 0.5Other Exchanges 183 55.1 111 31.3<\TBL>