In such instances, therefore, especially when conglomerates are as widely diversified as I.T.T. or L.T.V., it's difficult to attach much weight to synergism. The more decentralized the conglomerate becomes, the more it resembles a mutual fund or a pension trust account in a bank. Neither play active roles in the management of companies in which they hold stock. Synergism implies greater efficiency in the production of goods and services, but it is doubtful whether such considerations weigh heavily in merger decisions. Thus, it is to the stock market rather than the production line that one must look for an explanation of the conglomerate corporation.
Conglomerates vary widely in size and maturity.
The higher the price of its common stock, the more it can borrow by pledging stock as collateral or the more it can raise by selling bonds that are convertible into common stock at a prearranged price. Where the merger is consummated through the exchange of stock, the higher the market price of the conglomerate's stock, the fewer shares it must give up in exchange and the smaller the dilution in the earnings per share. It's not necessary for conglornerators actually to demonstrate that they can diminish risks and raise earnings per share through diversification. The mere intention to embark on the path of conglomeration may be sufficient to raise expectations. That venture prospered, and in 1960, Temco Electronics and Missiles was acquired along with Altec, a major producer of sound equipment, and other companies.