All indications point to a renewal of merger and acquisition activity in certain sectors of U.S. industry. With inflation effects favoring purchase of existing operations rather than new plant or equipment, and many small companies experiencing depressed stock prices in the current market climate, many corporations once again perceive acquisitions as an attractive way to grow.

At the same time, the poor experience of lenders and investors over the last few years has made it difficult for small companies to amass the capital they need to sustain a high rate of growth. Many find themselves for the first time receptive to offers from larger domestic firms, whose liquidity has improved with the general business recovery, and from foreign firms, who are increasing their direct investments in the United States in the belief that we offer less economic and political risk, larger markets and faster growth than many foreign countries. Barring new legislation or new interpretations of existing law, the fundamental business and economic forces stimulating merger activity are likely to continue for at least another year or so.

Buyers typically seek companies with high sales growth, above-average profitability, strong market positions and favorable environmental and regulatory outlooks. Such companies can be found in specialized sectors of agriculture; coal production; energy conservation; the chemical industry; communications; electronics; environment and fire protection; medical instruments; and financial services. The authors provide a list of specific companies in these areas, together with information on their market prices, book values, recent earnings growth histories and ownership and control.