Conglomerates in the 1980s: A Performance Appraisal

Abstract

N With the Celler-Kefauver Act discouraging horizontal and vertical mergers, mergers were predominantly conglomerate from 1950 through the late 1970s. For example, 79.10% of all mergers from 1973-1977 were conglomerate. The conglomerate, as a relatively new structural form, has evolved slowly since its initiation in the 1950s. This evolution includes three stages noted by Leontiades [11]: (i) the conglomerate wave, 19551968, when new conglomerates, fed by the expansion of the 1960s, naively yet feverishly acquired firms in unrelated fields; (ii) a period of re-evaluation, 1969-1976, during which conglomerates began to lose profitability as a result of the recession in the mid-1970s; and (iii) a third merger wave, 1977-1980s, which is seeing the emergence of professional managers, the entry of more conservative firms, and a corporate repositioning/restructuring of many mature conglomerates. Under this repositioning, maturing firms have begun to operate inter-industry strategic groups, in contrast to the random diversification of the past. The new type of conglomerate in the 1980s, referred to in the financial press as a focused conglomerate, removes much of the distinction between diversified firms and conglomerates.2 Statistics have shown conglomerates--such as Alco Standard, Gulf and Western, and Litton--to have simplified their corporate structures (Clark, Hindelang,