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BEHIND THE NEW DEAL MANIA

The latest consolidations are for growth, not cost-cutting

The valuations may seem staggering. Acquirers may seem to be overreaching. But week in and week out, deal mania continues. The latest crop: the merger of KPMG Peat Marwick and Ernst & Young, forming the world's largest professional services firm; the white knight rescue of ITT Corp. by real estate investment trust king Barry Sternlicht to create the world's mightiest hotel operator; and the return to prominence of media mogul Barry Diller, who is acquiring the television assets of Seagram Co.'s Universal Studios.

Meanwhile, what could turn out to be the largest deal in American history, the battle for MCI Communications Corp., continues. The players--WorldCom, GTE, British Telecommunications, and MCI--were expected to start a series of discussions by Oct. 24.

Unlike the last wave of consolidations earlier this decade--inspired by the need to slash costs--many of today's dealmakers are buying for growth. Assuming a continuing growth cycle, acquirers and merger partners alike are looking for new customers, complementary businesses, fresh markets, and the chance to leverage existing strengths with new ones. BUSINESS WEEK takes a closer look.




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Updated Oct. 23, 1997 by bwwebmaster
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