Britain's Cult of Bigness

While most U.S. corporations are continually on the prowl for ripe acquisition possibilities, merger fever is just beginning to infect Britain, which still abounds with inefficient, low-profit companies that duplicate products and services. Ironically, the Socialist government has been the primary booster of a trend toward bigger business, and in 1966 formed the Industrial Reorganization Corporation to promote and help finance regroupings in industry. As it happens, the chief beneficiaries of the government-sponsored merger wave are groups of experts who act as brokers for companies in search of a good buy.

Most successful of these is five-year-old Chesham Amalgamations & Investments Ltd. Finding a proper fit for its 400 clients is arduous work, normally involving research into 4,000 prospects annually and resulting in a meager three mergers a month. Explains Chesham Director Nicholas Stacey: "Our job is to explore the field in which our client is interested and find the most suitable company for his needs. Then we negotiate and put a valuation on it for him. Finally, we stamp on our 'Good Housekeeping seal.' "

Beyond the Balance Sheet. Only recently has the need for Chesham-type professionalism been recognized in Britain. Unlike their American counterparts, few big businesses in England can afford to employ full-time experts on mergers and acquisitions. Often the merger is a part-time endeavor of a few executives who lack the necessary expertise beyond the balance sheet to understand the long-range implications of the match. For this reason, Stacey estimates that between 1948 and 1960 about one-half of Britain's mergers turned sour. "Happily," says Stacey, "golf-club gossip and chance encounters between principals of businesses are no longer the recognized popular bases for mergers."

For the year 1966-67, Stacey reckons that his company has successfully concluded $50 million worth of corporate mergers. Clients give Chesham 4% for the first $1,000,000 paid for the acquired company, with a minimum of 1 % for all amounts in excess of $3,000,000. The outlook for the merger brokers is bright, for as Strathclyde University Professor K. J. Alexander puts it: "The curse of bigness has now been replaced by the cult of bigness." Consolidating the big, unwieldy corporations is only a start. England is still a country of almost cottage-size businesses whose copycat ways add little to the economy. A case in point: 48 manufacturers of electric blankets, pads and bed warmers produce 242 different models, and none of them makes much money. When the merger mood gets into full swing, those firms will be ripe.

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