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Conglomerates: The Rhetoric and the Evidence

THE United States has been undergoing in recent years its third large merger movement. This last movement, beginning perhaps in the mid 1950's, is larger in number of firms and in assets than the earlier movements at the turn of the century and in the 1920's. Further, the absolute rate of merger activity is increasing. In 1968, 2,442 firms were acquired as compared with about 1,500 in 1967, about 1,000 in both 1965 and 1966, and substantially smaller numbers in earlier years. Although merger activity declined sharply in the third quarter of 1969, the rate for the first nine months of 1969 was above the comparable period for 1968. The rate of increase in the amount of assets of the acquired companies has also been substantial. In 1968 such assets amounted to 12.6 billion dollars as compared to about 8.2 billion in 1967, about half of that in the preceding two years, and substantially smaller sums prior to 1965.1 Since the numbers relating to mergers seem large and are increasing, there are signs of concern in Washington. The concern has been focused on conglomerate mergers which have been of increasing relative importance in this merger movement. It is believed that conglomeration has the following harmful effects: