It may not last but Europe's deal makers have for now wrested the title of world takeover champions away from the Americans.
The deal that did it was yesterday's hostile-turned-friendly acquisition giving Vodafone AirTouch of Britain control over its German telecom rival, Mannesmann AG,for $170-billion (U.S.). The merger ranks as the world's biggest deal.
The outcome was the result of a contest that was decided by direct appeals to shareholders from the two chief executive officers, Chris Gent of Vodafone and Klaus Esser of Mannesmann, without the involvement of governments or recourse to the courts. In Europe, and particularly Germany, that is unprecedented given that the target was a high-profile company.
Comparisons are often made between what is called the Anglo-American style of shareholder capitalism and the European, especially German, model of corporations, which are seen as entities that must look after the welfare of all stakeholders.
When Vodafone launched its bid last November, it came under instant attack from Mannesmann workers, from German tabloid newspapers and even from German Chancellor Gerhard Schroeder.
It also faced the seemingly insuperable obstacle that no hostile foreign bid had ever succeeded.
German laws on voting rights, and Mannesmann's own articles of association, could be used to stall, and ultimately prevent, a deal going through. However, Mr. Esser opted not to use obstructive tactics or appeal to the politicians.
His shareholders have much to thank him for. Their shares in Mannesmann are valued at about $330 in the final offer that Vodafone made and that the Mannesmann board accepted. When the battle began, they were worth $200.
According to Ernst Fassbinder, an investment banker with Merrill Lynch in Frankfurt, German corporations are as keen as any to make deals. Figures from his own firm show that the value of corporate mergers in Europe more than doubled last year to $1.5-trillion, which was within sight of a record U.S. tally of $1.9-trillion. The British led with $384-billion; German acquisitions ranked second at $265-billion. However, most of these deals were friendly and were not cross-border ones.
The arrival of a common currency and unified capital markets have helped make valuations more transparent and made it easier to offer equity to investors in a foreign company within Europe.
The euro has also led to an enormous expansion in the European debt markets, enabling companies to finance the war chests they need to make acquisitions.
All of which suggests to some analysts that Europe will overtake the United States in corporate mergers quite soon, possibly this year.
However, merger mania in Europe is a more subdued affair than in North America, largely because some government and competition authorities are still opposed to foreign bids in some sectors, and levels of share ownership remain quite low.
The Vodafone-Mannesmann deal is an example because the two companies had many shareholders in common and two-thirds of Mannesmann stock was held by foreign, mostly U.S. and British, funds and institutions.
Because Germany does not have a funded pension system, foreign shareholders often account for a large percentage of the equity of major listed companies in Frankfurt. Not only does this mean that the Germans have a fifth column in their midst, but it also makes them less enamoured with the virtues of the Anglo-American way of doing things. Mannesmann, with its high level of foreign ownership, played the foreigners' game -- but there is no guarantee others will.
That said, changes are coming. Share ownership is increasing rapidly as Europeans recognize that the state pension system in Germany, France or Italy may be unable to provide for them in their old age. And politicians are learning that there are limits to their powers of intervention. The rules of Europe's single market, including widespread deregulation and the fact that Brussels now exercises control over competition policy, work in favour of takeovers -- whether they are local or cross-border -- by curbing what national officials can do to stop them.