Computers make mergers easier
US corporations have joined the computer dating game. As the rate of mergers and acquisitions speeds up, corporate computer matching is growing. It is spurred by a burgeoning number of requests for information from merger candidates, and by the increasingly sophisticated technology used to fill those requests.Skip to next paragraph
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Indeed, Conoco, a favorite takeover target these days, has already "merged" with Du Pont. It has also merged with Seagram, and most likely Mobil, as well.
The energy giant is still an independent corporation, of course, though how much longer is anybody's guess. The "mergers' have almost certainly taken place in computers, where executives of the corporate suitors can see how Conoco would look as part of their companies.
By refining and speeding up the merger-information process, some analysts say , the technology offered by these services could also be helping to speed the already- accelerating merger business. In the first six months of 1981, the number of such transactions jumped 38 percent over the same period last year, according to figures released this week by the W. T. Grimm & Co., which tracks published merger transactions. Through the end of June, Grimm had counted 1,184 mergers and acquisitions.
"Our business has been growing very rapidly," said John Trainer, vice-president for marketing at Compustat, a Standard & Poors subsidiary that has provided detailed data on more than 6,000 public corporations since the mid- 1960s. This information is used by firms looking for a company to acquire, someone to buy all or part of their business, or a suitable merger partner.
"A company can't contact the manager of the company it wants to merge with, but it can do everything else," said Jerry bell, senior regional manager at Compustat. "They can ask, 'If this acquisition goes through, what would the new company look like?'"
Mr. Trainer estimates that the merger information business is growing by about 25 percent a year.
Compustat is one of at least five firms providing computerized business information to the lengthening list of players in the merger and acquisition game. These firms gather information from annual reports, data supplied to the Securities and Exchange Commission, news reports, analyses by workers, and state corporation records.
The newest firm to deal in this information is Mergex, opened last full by Dun & Bradstreet. Using D&B's data base of 4.7 million businesses, Mergex can provide data on more than 425,000 companies. While Compustat deals with public companies, almost all of those on the Mergex list are privately held.
The procedure at most of the firms is similar to that offered by Mergex. A client tells the firm exactly what sort of company it is looking for, including type of business, location, size, sales, profits, net worth, and number of employees. Mergex then does a computer "screen" to find potential candidates. If the client is interested, Mergex will call the targeted firm and ask if it is interested in being acquired -- without telling who the client is -- said Art Rogoff, vice-president and general manager.
Although Mergex is just beginning, Mr. Regoff notes, the nature of the merger business should give it plenty of room for growth. By dealing almost exclusively with private companies, nearly all of the mergers it computes involve smaller firms. Multibillion-dollar deals like Conoco-Du Pont grab the headlines, but over a third of all mergers and acquisitions are worth less than says.
Many of these are marriages between two small firms or the acquisition of a small firm by a large corporation seeking a new product that would be too costly to develop itself.
The acquiring companies are not the only ones using this computerized information. Many merger brokers and intermediaries also plug into the data banks, vastly speeding up the process of finding, analyzing, and selecting merger candidates. It can also be used to avoid problems with federal regulators.
"We receive a lot of requests from lawyers who want to find out if there are many antitrust implications" in potential mergers, said Jay Gould, president of Economic Information Systems. The EIS directory of 1,500 privately held companies is used for merger and legal information, marketing research, and investigating potential competitors.
Dr. Gould disagrees with those who feel services like his make mergers easier.
"All these files do is give you access to the possibilities," he says. "You still have to do the work, get on the phone and see if there is an interest, and negotiate . . . particularly with private companies."
Another Standard & Poor's subsidiary that tracks potential merger candidates follows both private and public firms. Compmark's data base of more than 36,000 companies includes 7,700 public companies, said Compmark spokeswoman Susan Murphy.
In her three years at Compmark, s he said, information requests have doubled.