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History Revisited

March 16, 1986

Your Jan. 2 article "Year of Merger Mania and a Mega-Market" highlighted the fiscal insanity that prevailed in 1985.

Glancing over it, I find that about $67 billion was traded for various companies from March to December. Never mind that most of the deals involved junk bonds to be paid off with the earnings of the merged companies. I'm sure that all of us would like to make purchases on those terms!

I can't help thinking of that old saw, "Those who cannot remember the past are condemned to repeat it." We don't have to go back beyond 1968 for perfect examples of problems that can arise.

Back then, there weren't junk-bond mergers but many companies were vacuum cleaners sucking up everything in sight. Mobil grabbed Montgomery Ward and is now trying to dump it. Control Data stock ran up to $141 a share and the company grabbed a financial outfit which it has since sought to unload; the stock has taken a beating. Litton stock was well into the three-digit figure, and the company swept up everything it could; a few years later, it was divesting whatever it could. There were many others that found their delightful meals indigestible.

They all operated on one of two theories, enunciated by 25-year-old MBAs: "We can supply much better management and run the company more profitably," or "Their management is great and, with our capital, we can really make something of the outfit."

Operating on a different set of rationalizations, today's merger developments could have the same sorry results. To mix metaphors, when those chickens come home to roost, someone will pay the piper.

IRVING M. KOPF

Los Angeles

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