186 InManagersWeTrust
There are few ways in which a corporate board can destroy share-
holder value as dramatically as through mergers and acquisitions. As
globalization advances, more opportunities for deals arise. Some will
be desirable; many will not. Paying close attention to the activity in
this field is of great importance to investors and is addressed again
later in this part.
Capital Markets
The aggregate stoc kmar ket capitalization of Europe is larger than
that of Nasdaq and over half that of the New Yor kStoc kExchange.
(Given Mr. Market, the aggregate market capitalizations can change
dramatically in short time periods, but as of early 2000, the amounts
were about $7 trillion, $4 trillion, and $11 trillion, respectively.)
The Frankfurt and London stock exchanges announced in July
1998 a plan to integrate their facilities and permit the trading of each
other’s listed securities on both exchanges. France, unhappy with its
exclusion, quickly gained admission to the Frankfurt-London alli-
ance (although as a 20% player, compared with 40% for each of the
founding exchanges). Soon after France announced its inclusion in
the emerging pan-European exchange, exchange officials in Milan,
Madrid, Amsterdam, and Brussels echoed a similar eagerness to par-
ticipate in the venture.
Although the European alliance had difficulty agreeing on a
common trading system, the group quickly elected to permit stock
trading between the various exchanges. While negotiators struggled,
the once-snubbed French Bourse too kadvantage of the delays by
signing itself up with exchange partners from Amsterdam and Brus-
sels. This troika’s single market—a full integration of these three
exchanges called Euronext—boasts listings with a combined market
capitalization equal to over a quarter of that of Europe as a whole.
As the Euronext group forged this deal, the London and Frank-
furt exchanges agreed on a merger. The two formed iX, standing for
International Exchanges, a market poised to integrate blue chips and
tech stocks from the two dominant European capitals and boasting
a total capitalization of over half of that of Europe as a whole. That
deal was interrupted when OM Gruppen, operator of the Stockholm
(Sweden) stoc kexchange, made a hostile bid to buy the London
Exchange. However the dust settles on this array of parties, these
historical deals will not end capital market integration in Europe,