If stunning mergers and acquisitions indicate big changes in an industry, you might believe that the networking business is under siege.

Yet today, start-ups often act as tiny independent research and development labs, with the goal of eventually being acquired. When they create new technology, they sell themselves to a bigger vendor rather than incorporating that technology into new products. Likewise, companies have begun to acquire others as a way to fill jobs. Heavy merger activity has now become the symbol of a vibrant, growing industry.

But even by the networking industry's standards, M&A deals have reached a fevered pitch in the last 15 months in both volume and prices.

In fact, transaction volumes have increased by more than a third worldwide from 1998 to 1999, according to M&A specialists Broadview in Fort Lee, N.J. In 1998, Broadview tracked 4,776 transactions worldwide, worth $474 billion in North America. In 1999, worldwide transactions climbed to 6,008, worth almost $1.21 trillion in North America alone. The telecom industry in particular saw a lot of activity. For instance, more than half of the 18 companies Cisco acquired in 1999 developed technologies and products for service provider networks.

And with all-things-Internet generating jaw-dropping market capitalizations on Wall Street, the valuations of the deals for small companies can be as astounding as those for bigger players. While one could nod appreciatively at the $62 billion value attached to AT&T's MediaOne acquisition, multibillion dollar valuations for less-established companies are very common, as the following chart clearly shows.

Acquisition activity continued unabated in the first quarter of 2000, and is expected to carry on at a similar pace for the rest of the year. Some companies are hurrying their acquisition plans because of impending changes in accounting procedures. By year-end, the Financial Accounting Standards Board (FASB), the standards body for accounting rules, will ban mergers that rely on the current "pooling of interest" rules. The Security and Exchange Commission requires public companies to follow FASB rules.

Currently, the pooling rules let merged companies report their financials as if they were one company all along, rather than taking hefty charges for items such as goodwill. This allows the newly merged company to have shinier, more attractive financials. The FASB will also shorten the time over which a company may write off goodwill from 40 to 20 years.

When the pooling rules vanish and goodwill must be amortized faster, companies will likely change how they report per-share impact of mergers, predicts Shipman & Goodwin, LLP, a Hartford, Conn., law firm that specializes in mergers and acquisitions. Companies also will probably try to account for goodwill as a one-time charge at the time of the transaction, the firm says.

To help you keep up with this flurry of acquisition activity, Network World has compiled a sampling of the most significant M&A activity in the networking industry since January 1999. This list contains mergers and acquisitions that were important either for their dollar amount or the companies involved.

Contact Senior Editor Julie Bort

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