Mergers Hit Record $866 Billion High Stock Prices, Low Interest Rates Fuel Jump In Corporate Marriages

Corporate mergers surged 51 percent to a record $866 billion in 1995, propelled by record stock prices, the lowest interest rates in two years and a buoyant U.S. economy, according to Securities Data Co.

Marriage, corporate style, increased amid regulatory and technological changes that encouraged banks, telecommunications companies and drug concerns to combine around the globe. They rose as corporate chieftains hunted for ways to boost revenue and slash costs amid slow growth in the U.S. economy.

This year’s totals dwarfed the old record of $572.3 billion in 1994, Securities Data said.

The “favorable cost of money” - in other words, low interest rates - was key because it allowed companies to finance acquisitions inexpensively and helped to boost their stocks, said John Keefe, an independent analyst who follows Wall Street.

Also, many executives decided that with the economy slowing, it’s more efficient to buy rivals than to build their businesses by themselves, Keefe said.

Mitsubishi Bank Ltd. and Bank of Tokyo Ltd. inked this year’s biggest merger agreement, a $33.8 billion transaction. In the U.S., Disney’s $18.8 billion plan to purchase Capital Cities/ABC Inc. was the biggest.

On Wall Street, corporate marriages helped make 1995 the second-best year for the U.S. securities industry. Brokerage firms earned an estimated $7 billion before taxes this year.