The takeover game - and debt

THE game of corporate Pac-Man has started up in earnest again. No wonder Federal Reserve chairman Alan Greenspan is suggesting that Congress consider revising tax laws to limit the borrowing that finances these takeovers. The management of RJR Nabisco moved last week to buy out the company for $17 billion, and then received a counteroffer - since rejected - from Kohlberg, Kravis, Roberts & Co. for $20.3 billion.

Philip Morris, the tobacco giant now diversified into the largest consumer-products company in the nation, is after Kraft. Grand Met (the distiller, that is, not Snoopy's life insurance company) has been after Pillsbury. And there are others.

When it's all over, though, there won't be one more cookie baked, or one more can of tomatoes put onto the shelf, for all the fuss. There will, though, be lots more dollars in the pockets of the Wall Street go-betweens.

All this is happening at the confluence of several different currents:

Underlying economic uncertainty makes basic businesses like food products, with their established brands and loyal consumers, look pretty good to investors.

As brand names and varieties (``New!'' ``Improved!'') proliferate, the struggle for desirable supermarket shelf space heats up; individual brands do better under the protection of a giant food company.

Would-be mergers and acquirers are eager to get their deals done before the Reagan administration, with its laissez faire attitude on antitrust issues, departs in January.

Wall Street firms see takeovers as the way to make money today; some deals seem driven more by the matchmakers' enthusiasm than the principals'.

Debt has acquired new respectability in the corporate world, as it has in the realms of personal finance and of federal budgeting.

What will it all mean?

Counterproductive uncertainty, for one thing. Once, only little companies got bought out, but the past week has seen the working definition of ``too big to have to worry'' double from a $10 billion company to a $20 billion one. ``Quantum leap'' was Wall Street's term for the RJR bid.

In theory, the takeovers should lead to more efficient allocation of capital, as the proceeds from buyouts are reinvested in promising new opportunities. Some companies taken private (bought back, in effect, from stockholders) will enjoy the advantages of having managers who are also owners. And in some mergers, that almost mystical phenomenon, synergy, will occur.

But don't hold your breath. In the short term, brace for lower productivity (people worried about losing their jobs tomorrow do not work very efficiently). Brace for fewer marketplace choices as monopoly reduces competition. Brace for the ``promising new opportunities'' for investors awash in cash to be merely more mergers, acquisitions, and buyouts of questionable productivity.

And brace, too, for the companies taken private to be so far in debt that they are unable to pay reasonable salary increases and are otherwise strapped. Their situation is not unlike that of a couple deeply in debt for more house than they can afford. They've consigned themselves to a lot of tuna-noodle dinners, and if the car needs a new engine or the furnace breaks down some January night, they've got real problems.

The government may not have an obligation to protect investors from their own folly, but a review of the tax-code provisions that encourage corporate indebtedness is certainly in order. And we certainly hope the new administration in Washington will be tougher on mergers and acquisitions than the current one has been.