Chase and J.P. Morgan learn the realities: Adapt or else

Posted: Thursday, September 14, 2000

NEW YORK (AP) -- A long pedigree of elitism and power earns few privileges in a business world with its competitive eye on creating tomorrow and a disdain for the ways of yesterday.

And it matters not a whit that you were once considered John D. Rockefeller's bank or that your company bore the name of J.P. Morgan and that you personally arranged loans to governments.

Both Chase Manhattan Corp. and J.P. Morgan & Co., each with deep roots in financial history, were perhaps slow to accept the inevitable: Adapt or be left behind.

Theirs was a wrenching acceptance of a changing financial world, one too large to be impressed by individual reputations, and one too swiftly evolving to allow adherence to tradition.

Globalization, the development of trade on a world rather than regional basis, today demands financial giants capable of offering a supermarket of services rather than limited specialty boutiques.

Accelerating the change, Congress last year overturned a part of the 1930s-era Glass-Steagall Act that had separated commercial banks, mainly lenders, from their investment bank counterparts.

This move has encouraged huge financial mergers to cater to the underwriting and other needs of equally large corporate mergers.

Even before the Chase-Morgan hookup, agreements were announced by Credit Suisse Group and Donaldson, Lufkin & Jenrette Co., and UBS AG with Paine Webber Group Inc.

But globalization is but one of the forces pressing industries to change. Wealth has spread vastly during the post-World War II years, especially during the most recent decade, and with it has come demands for new services, including mutual funds and stocks.

At the same time that size was changing the marketplace, small, innovative, technology companies were emerging, many of them associated with computers and the developing Internet.

It hardly can be disputed that no person alive today has lived in a world changing faster than today, or at a time when new companies have become vast and powerful within a few years.

Back in the early 1930s, Chase had assets of around $2 billion. Today, it is possible for a 15-year-old company to achieve a market value of that amount, pressuring larger companies to change or die.

A consequence of this is the development of an enormous market in bringing new companies public -- initial public offerings, or IPOs -- and in arranging the subsequent acquisitions and mergers of many.

So far this year, 7,405 mergers and acquisitions worth $1.32 trillion have been announced in the United States -- a record pace -- according to Thomson Financial Securities Data, of Newark, N.J.

Again, the merger market is worldwide and across borders, which necessitates financial institutions capable of operating worldwide. Globally, according to Richard Peterson of Thomson, there have been 33,700 deals valued at $3.4 trillion this year.

It's a bit different world from the old days less than a century ago, when old J.P. Morgan could gather his financial associates to help calm a financial panic or arrange loans for foreign governments.

End Adv PMs Thursday, September 14.

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