Another factor behind the increase in merger activity is the record performance of stock markets, which has enabled companies to finance major acquisitions on the strength of their inflated share prices. Earlier this year Vodafone, the UK mobile telephone operator, acquired its US counterpart AirTouch by making AirTouch shareholders a cash and stock swap offer worth a total of $ 62bn. The deal created Vodafone AirTouch the world’s largest mobile telecoms group with over 29m customers.
The European banking sector is also seeing a trend towards consolidation, a process accelerated by deregulation, over-capacity and the arrival of the single European currency.
New technology is also making it easier for companies to diversify as different industries come to rely on common technologies. Microsoft, for instance, is busily diversifying into cable and mobile telecommunications as well as WebTV. The US software giant has a $ 56bn. equity stake in AT&T, which recently bought Media One for $ 57bn. Under the deal, Microsoft will succeed in introducing its recently-launched cable television software into millions of homes in the US and UK.