Schenk, whose field is industrial policy and corporate strategy, says western markets are ruled by a few giant, inter-dependent companies, trapped in a merger hype. "If one firm puts the spark to the tinder, others will always follow," he told Reuters in an interview. The downside is that mergers and takeovers are often unproductive and fail to generate profit, Schenk says.

According to his research, 70 per cent of all mergers bring neither real benefits nor real disadvantages. Another 15 per cent are failures, he says, and only 15 per cent are real winners. His conclusions are based on studies of 8,000 mergers and acquisitions, showing that companies systematically lag behind in profitability for a periodof a several years after a merger.

The Dutch corporate scene, like others in Europe, has experienced frenetic merger activity this year. Banks ING and ABN AMRO continued their empire building in Europe, Asia and North and South America. Chemicals giant Akzo Nobel swooped for Britain's Courtaulds, while sector rivals DSM and Gist-Brocades decided to combine.

There were tempestuous times for publishers Reed Elsevier and Wolters Kluwer, whose planned link-up fell apart on monopoly concerns. The same was true of oil storage firms Pakhoed and Van Ommeren. Stock market studies show that the shares of a target firm tend to surge once a merger is announced, but the shares of the acquiring company weaken after it is completed."For example, shares in Fortis and ABN AMRO did not react positively to the offer for Generale Bank, but Generale shares did," Schenk explained, referring to a bidding war, won by Fortis, for Belgium's Generale Bank.

So the only ones to profit from a merger are the shareholders of a targetcompany, who may end up about 30 per cent richer, according to Schenk's calculations. Another measuring tool used by Schenk is the growth scenario of companies on the takeover trail. Schenk concludes that once a company reaches a certain maximum growth level, it can no longer reduce its production costs.

"Almost all sectors in the US and European market have seen their firms grow to such an extent that they have passed the size where there are advantages from mergers in terms of reducing production costs, with the exception of the production of mainframes, video casettes and titanium oxide," says Schenk.

In the banking sector, estimates for maximum growth are between $10 and $100 billion. "ABN AMRO has easily reached that point with a total of around 700 billion guilders ($350 billion) and is very unlikely to see any further growth advantage (in terms of productivity) through an acquisition," Schenk says. Japanese companies, on the other hand, prefer growth through their own investments, with mergerstaking place on a much smaller scale.

As a result, a considerable world market share has shifted to Japanese companies. "While we were absorbed by mergers and takeovers during the previous merger wave of the mid to late-1980's, the Japanese invested in process and product innovation and managed to beat us on th international market," Schenk said.