City & Business: The perfect couple?

MERGERS of equals rarely work. Look at the ghastly marriages of the Nationwide and Anglia building societies, or the Payless and Do It All do-it- yourself chains. Whatever the supposed cost savings and synergies, these are usually outweighed by the culture clash, the communication gap and the messy panic of two lots of managers trying to protect their empires and their jobs.

So I was pretty sceptical when Reed International announced in 1992 that it was merging all its operations with Elsevier of the Netherlands. The new grouping, Reed Elsevier, would have pounds 3bn of sales, producing everything from Woman's Own to the Lancet. When I put my doubts at the time to Pierre Vinken, the chairman, he told me this was not the bolting together of two supertankers but 'the mingling of two fishing fleets'. Pretty words, I thought, and waited for the marital fireworks to begin.

Irritatingly, all seems to have gone smoothly. Last week Reed Elsevier announced a stonking set of first-year results. The company has started to exploit scale economies in areas such as paper buying, insurance and bank borrowing. There have been cost savings in the few cases of product overlap.

Then there are the less tangible 'strategic benefits'. For example, the new group felt able to acquire a French legal publisher because the Reed people had the legal publishing expertise and their Dutch counterparts were old hands at doing business in France.

So far, so good. But I'm not completely convinced. Reed and Elsevier would still have produced great figures this year had they continued on their separate paths. And the pounds 10m cost savings achieved to date are dwarfed by the pounds 41m paid to the merchant bankers, accountants and lawyers who stitched the merger together.