FRONT PAGE - COMPANIES & MARKETS: Boom takeovers unwinding, says survey A THIRD OF DEALS FROM BULL MARKET PEAK COMING APART: * NEW DOUBTS OVER SHAREHOLDER VALUE: * 32% OF DEALMAKERS REPLACED:

Financial Times; Feb 22, 2002

By DAN ROBERTS and ANDREW TAYLOR

More than a third of the biggest international takeovers agreed at the height of the bull market are now being unwound, according to a survey.

The flood of companies seeking to sell businesses they recently acquired at great expense casts further doubt on whether most merger and acquisition activity benefits investors.

The survey by KPMG Consulting also reveals that 32 per cent of the chief executives or finance directors responsible for planning the original deals have now been replaced.

Global M&A activity has slumped to its lowest level for nearly 10 years in the wake of the economic downturn and falling share prices.

But experts also fear that a generation of managers and shareholders have been put off further deal-making for good by the problems experienced by highly acquisitive groups such as Enron. KPMG found that two thirds of the companies bought between 1996 and 1998 still needed to be properly integrated.

Its original study of the 500 biggest cross-border deals struck during this period found that the majority had destroyed value for shareholders in the short term.

Returning to these companies it has found a higher than expected proportion are trying to turn the clock back by selling businesses acquired in the boom.

Recent examples include Invensys, the British engineering group that announced a large disposal programme this week; Tyco, the US conglomerate splitting itself in four; and telecoms groups such as AT&T and British Telecommunications that are unwinding acquisitions made during the telecoms bubble.

"The 1990s 'urge to merge' has created a huge hangover of unfinished business," said John Kelly, head of merger and acquisition integration at KPMG Consulting.

Some acquisitions always envisaged a degree of later disposals to give focus to the new group - for example Aventis, the drugs company formed from Hoechst and Rhone-Poulenc, which has made a number of non-core disposals since. But other deals appear to have benefited only the investment bankers and advisers involved in the transaction.

The UK electricity sector has been one of the busiest with deals worth almost Pounds 40bn, including assumption of debt, since the beginning of 1995. Some companies have changed hands several times. US companies that flooded into the UK market in the mid to late 1990s in particular have recently sought to unwind original purchases. "The intoxicating days of growth through further acquisition have now given way to a more sober climate," said Mr Kelly.

Additional reporting by Andrew Taylor {I) www.ft.com/banking