A corporate takeover spree is signaling a new aggressiveness on the part of U.S. executives, who suddenly appear less concerned about the economy or about making strategic missteps.
The parent of retailer Kmart is swallowing Sears, Roebuck & Co. Cellular phone giant Sprint Corp. is reported to be in talks to buy rival Nextel Communications Inc. Johnson & Johnson is widely expected to take over Guidant Corp., a maker of pacemakers and cardiac stents.
And on Monday, software company PeopleSoft Inc. ended its 18-month-long fight to remain independent, agreeing to a $10.3-billion buyout by Oracle Corp.
The latest wave of takeovers, and expectations of more to come in 2005, helped to push a key index of blue-chip stocks to a three-year high on Monday. But as corporate deal making ramps up, so do worries that business consolidation will mean more lost jobs in an economy still struggling to generate healthy employment growth.
Experts say a confluence of factors is driving the surge in deals. Many firms are flush with cash after deep cost cutting in 2001 and 2002 helped profits soar. Rebounding share prices since 2002 also have given companies more spending money in the form of their own stock.
"For those companies in industries that have good stock prices, they have good currency" for deals, said Kent Kresa, chairman emeritus of Northrop Grumman Corp. in Los Angeles.
More important is that many corporate managers are gaining confidence in the economy and in the prospects for their businesses, say investment bankers, lawyers and others who advise executives. President Bush's reelection, widely supported by business leaders, boosted that sentiment, they say.
"It's a sign of a different attitude in terms of companies' perception of the future," said Ned Riley, chief investment strategist at investment firm State Street Global Advisors in Boston.
That increased confidence is translating into a willingness to take more risks -- a big change from the hunker-down mentality that prevailed after the stock market began to crumble in 2000 and after financial scandals intensified scrutiny of business.
After several years of caution in the executive suite, "I think a lot of companies have already wrung out costs, and now it's a question of, how do you grow?" said Stephen Arcano, a partner and merger advisor at law firm Skadden, Arps, Slate, Meagher & Flom in New York.
