The new strategy is bricks plus more bricks... not bricks plus batteries.

It is not just the booming economy and the steaming stock market that make late 1997 look a lot like late 1987. The pace and audacity of the mergers and acquisitions of recent months also bear a striking resemblance to those of a decade ago – at first glance, at least.

But this time around the deals are rather different. Back when Hanson was at its zenith, a diversified conglomerate seemed to be the thing to be. Long before the words “core competencies” became a buzz phrase for managers everywhere, Hanson and White and their acolytes at the likes of BTR and Williams made a strong case for efficient managing being the corest of core competencies. On the basis that management is all about mastery of a few basic principles, they appeared to be saying that somebody who made a good fist of managing one type of business was well placed to make a go of just about any other.

Encouraged by their financial advisers, they toured the globe looking for loosely run companies to which they could apply the magic of economies of scale, synergy and centralised accounting systems. While the going was good, the enterprises they built up – stretching, say, from bricks and aggregates to batteries and tobacco, or from sports goods to tyres – looked impressive enough. Until the crash came along, you could almost buy the theory that being in a variety of sectors was an effective hedge against industry downturns. You almost believed that sheer size would save the day.

But the encroaching millennium has brought a new imperative for the corporate warriors of the 1990s: focus. Though it is at times tempered by calls for executives to widen their vision so that they have some notion of what is going on around them, the principle remains that organisations should decide what they are good at and throw all their energies at it.

The modern world, goes the thinking, is too complex for anyone but experts.

Big can still be beautiful, but the beast should have just one head rather than several. After all, the notion of the “national champion” espoused so strongly by Michael Heseltine when he was in government was not all about encouraging jacks of all trades; it was centred on the idea that British Industry was better able to compete internationally through consolidation of assets and expertise.

The new trend can be seen most effectively in Granada’s takeover of Forte – manifested as it is in Granada’s heavy presence at the motorway system’s service areas. It can also be seen in the acquisition of several regional electricity companies by large US utility companies, in the attempted merger between Guinness and Grand Metropolitan and so on.

In the words of David Sadtler of the Ashridge Strategic Management Centre, “the objective these days is to increase market share and market power and to set up rationalisation of cost”.

To the extent that some of this thinking has been prompted by the ability of new arrivals – such as Microsoft – to be hugely successful through exploiting niches, the shift towards focus has also been accompanied by attempts to become nimbler, more responsive and – often – smaller. The most obvious sign of this approach to dealing with fresh competitive pressures has been the widespread adoption of the much-criticised practice of “downsizing”.

Some organisations have dealt with the problem by splitting up business units within the company, as the US computer and electronics company Hewlett-Packard has done. Still others have opted for spinning off operations that are no longer seen as core – in some cases actually splitting up, or demerging, the original organisation into two or more constituent parts.

The last course has a certain logic to it. Sadtler has collaborated with two other consultants on a recent book, Break Up! When large companies are worth more dead than alive, that advocates dismantling companies on the grounds, among other things, that only a few corporate centres create more value than they destroy.

But, though the immediate result might be the release of previously locked-up shareholders’ funds, forcing companies down this road becomes another factor behind the recent spate of market-share-prompted mergers and acquisitions.

Recent experience suggests – and the Break Up! authors acknowledge this – that the break up process can create an open season on at least one of the former parts. Just look at how quickly Energy Group – one of the four bits of the old Hanson – succumbed to the US power company push into Britain or consider the almost constant bid speculation that has surrounded EMI Records since it was demerged from Thorn.

The City is said to have “got religion” over focus to such an extent that it simply will not support the old-style diversifications: witness Tomkins having to buy back its own shares because of its inability to do deals, says Sadtler. But are the banks any wiser now than they were before their conversion?

Recent research from Mercer Management Consulting makes salutary reading.

It says that, though common sense would suggest a better return from a deal based on promoting a core strategy, the data provides no such link.

Indeed, nearly half the mergers of the 1990s, compared with more than half in 1980s, are failing to create shareholder value. With the very largest deals, the odds rise to 3:1.

According to Kenneth Smith, a vice president with the firm, the problem is that the better the fit the greater the price the acquirer generally has to pay – so putting pressure on the ability to produce returns.

His solution? Concentrate on the old virtues of communicating within as well as outside the organisation, paying attention to bringing the cultures and other aspects into alignment and acting swiftly and with purpose.

Roger Trapp is management editor of the Independent and Independent on Sunday.