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To: Elsewhere who wrote (29995)	3/14/1999 12:12:00 PM
From: goldsnow	Respond to of 116814

Europe Mergers Don't Hurt US Firms Saturday, 13 March 1999 L O N D O N (AP) LIKE PRO wrestlers on steroids, European businesses are merging and consolidating to bulk up for competition in a single-currency arena. The recent wave of mergers that created powerhouses like auto maker DaimlerChrysler AG would seem at first to present a stiff challenge to U.S. companies looking to enter Europe in a big way. But Americans have little to fear - and maybe even something to gain - from dealing with European firms that are shrinking in number and growing in size, analysts and executives say. "This is an opportunity," argues Philippe Haspeslagh, a professor of corporate strategy at INSEAD, an international business school in Fontainebleau, France. "A typical American company has tended to focus on what's common in Europe, whereas many European companies for a long time have focused on what makes each country different." By adopting the euro and reducing the cost of currency transactions, 11 European countries have made it easier for companies to merge across borders. In addition to the $33 billion combination of Daimler Benz and Chrysler last year, the biggest deals include Deutsche Bank, which is buying New York-based Bankers Trust for $10 billion and Ford, which will take over the car division of Sweden's Volvo for $6.5 billion. Governments in Europe have only recently deregulated or privatized key industries like telecommunications, creating opportunities in Italy, for example, for Olivetti SpA to launch a takeover bid last month for a much bigger rival, Telecom Italia SpA. Energy companies that are heavily regulated in Europe are preparing for competition at home by expanding into Latin America, where markets are more open. The problem for some European players now entering the merger game is that they are playing "a game of catch-up," said Margaret Young, the head of mergers and acquisitions in Europe for Donaldson, Lufkin and Jenrette, a U.S. investment bank. In some fields, like auto manufacturing, European companies are already falling farther behind. By virtue of the size of its European business alone, General Motors Corp. ranks as the region's second-largest car company. Ford ranks fourth. "I think the U.S. companies in Europe are already so large that perhaps Daimler-Benz needed to be part of Chrysler in order to compete," said Christopher Will, European auto analyst for Lehman Brothers in London. Will said medium-sized producers like Renault SA of France and Fiat SpA of Italy should be forming alliances to compete more effectively in the future, but that they have little incentive to do so in the current climate of healthy profits. The attempt this past week by Banque National de Paris to take over two French banking groups Societe Generale and Banque Paribas suggests a different problem: nationalism. Many Europeans still are resentful of commercial incursions by foreigners. BNP's bid to form the world's largest bank from purely French components smacks of chauvinism, but also makes it harder to trim payrolls and close excess branches because of France's high unemployment rate of nearly 12 percent. "Consolidation is absolutely vital to the European banks, but it can't be simply in-country mergers," said Herbert Aspbury, the London-based regional executive for Chase Manhattan Bank. "To be really compelling, it has to be truly cross-border." Some of the consolidation may actually be counterproductive in the long-run. Ego satisfaction, more than economic logic, has motivated some recent deals, said Mathew Hayward, who teaches international management at the London Business School. "These are not attempts to position companies for the future," he said of takeover bids like the one by BNP. While these companies may try to strip costs out of the system and charge higher prices, they may not be properly positioning themselves in new businesses in a way that will improve their growth, he said. But the real losers in the current consolidation craze are likely to be small- and medium-sized European firms. As manufacturers grow larger and their ranks grow thinner, they will look increasingly for bigger, and fewer, suppliers. At the same time, smaller firms will find it more costly to raise capital. Investment fund managers are starting to look for opportunities on a Europe-wide basis and are devoting less capital to small firms in each country. "Instead of having 11 countries you can be a big fish in, you're now going to be that much smaller," Young said. "You're going to get pushed farther down the food chain." --- TICKER Big oil-producing countries agreed to cut production to try and boost rock-bottom crude prices. ... Intel Corp. reached a tentative agreement with federal regulators to settle claims that it illegally bullied rivals to maintain its dominance in the high-tech industry ... Sony will cut 17,000 jobs over the next four years as part of a sweeping restructuring ... RJR Nabisco announced plans to sell its international tobacco business spin off its domestic tobacco operations ... Lycos Inc.'s top shareholder quit the company's board to protest its proposed merger with the USA Networks cable television company.