ONE OF THE most fiercely contested corporate merger battles of recent years is the struggle involving Bendix, Martin Marietta and United Technologies. The technical details change from day to day, and the outcome is not clear. But while you're reading about the latest maneuvers, counteroffers and lawsuits, here are a few things to keep in mind.
First, this essentially is a battle between managements. When this is all over, the businesses involved will, for most employees and customers, continue in much the same form in the short run. But either William Agee, who now runs Bendix, or Thomas Pownall, who now runs Martin Marietta, will probably be out of a job. And long-term management and corporate strategy will surely differ. Stockholders will essentially be deciding which management can invest the capital most fruitfully. The merger contest is as good a way to decide between competing managements as has been devised.
This contest is also an example of corporations adjusting to changes in the economy. Bendix's largest business is supplying the auto industry. Mr. Agee seems to have decided that autos are not a growth business for the rest of the 1980s and that the defense contracts Martin Marietta specializes in are. Bendix, unlike most corporations heavily involved in autos, is blessed with a large supply of cash, obtained when it sold off certain divisions. So it wants to use that cash to buy assets that it thinks will produce long-term growth. But that same cash makes Bendix attractive to others.
Some people fear that mergers may leave us with an economy dominated by a few large corporations. But this does not seem to be the way the world works. New businesses grow: many of today's largest corporations did not exist 10 or 20 or 40 years ago. And there are plenty of businesses that have failed to grow in step with the economy. Near the top of the list of large American corporations in 1920 were Armour, American Smelting and Swift. Where are they now?
Some critics believe that the huge sums required to consummate mergers would be better spent in other ways. But mergers do not reduce the supply of investment capital; the capital is just in different hands. Which is not to say that mergers always produce the best possible results. Sometimes acquired companies turn out to be too big or too expensive to swallow: Dupont, for example, is selling off some of the oil properties that made its acquisition of Conoco so attractive. And mergers between direct competitors will usually reduce competition and hurt consumers.
We wonder also if there is not another cost that's harder to quantify. Are corporate managers and entrepreneurs distracted by mergers--by the opportunities they present and the dangers they pose? Are their minds and imaginations diverted from other possible business strategies that might be more profitable in the long run? We don't know the answer, but we think it's a question worth pondering at a time when many business leaders fear they have been too attentive to the short-term balance sheet and not attentive enough to the long-range strategic needs of their companies.