The market's response to Ray McLoughlin's proposal to split James Crean into two by demerging the print and packaging business into a separate listed company has been underwhelming, to say the least. The share price has remained still since the announcement, indicating that the market is unconvinced about the merits of the planned split.

Splitting the business is, according to Crean, "designed to eliminate the diversity in the group and thereby to create conditions in which the earnings performance of the principal business can be more easily assessed and valued by the market". All very well, but is the market going to be interested in two separate Crean companies whose total market capitalisation is unlikely to be much bigger than the combined company? All the indications are that in the post-EMU investment environment, fund managers are going to want to invest in bigger, not smaller, companies.

NCB analyst Rory Gillen is pretty dismissive of the demerger move and believes that it comes too late to add serious upside to the shares. "Some action is better than none," is the NCB man's less-than enthusiastic comment on the demerger plan.

And the results from Crean - especially from the Wade electrical business - were pretty dismal. Add in the likely costs of the demerger - a costly legal and financial process. And company broker Davy has slashed its 1998 and 1999 forecasts for Crean. The 1998 profit forecast has been hacked back from £9.6 million to £5.3 million and the 1999 forecast is cut from £10 million to £8.2 million.

Share prices of smaller companies have fallen more than bigger companies in the recent market slump and a report from Merrill Lynch this week suggests that fund managers with stakes in smaller companies will need to be more proactive in encouraging mergers between companies in the same line of business.

Merrill Lynch analyst Tim Steer was referring specifically to Britain when he said: "There are a number of very similar companies which would just as well be run by one management rather than by two or three." That argument is just as valid for many smaller Irish companies.

If Merrill is calling the post-EMU environment right, then investors may show little interest in tiddlers like Crean's demerged print and packaging business. However, they might be interested in one large Irish packaging group, possibly taking in the likes of Clondalkin, Adare and the Crean business.

Some of the managements might not be all that keen on that scenario, for obvious career reasons, but unless some moves are made to make Irish companies attractive investments in the sector-based investment climate after EMU, then they are in serious risk of getting left behind when fund managers no longer have to worry about balancing Irish pound assets and liabilities. Nelson Loane has already made it clear he intends to grow the Adare business and a bid for the British labels group Ferguson is now seen as inevitable. After the Prontaprint and Kalamazoo acquisitions, Adare sees Britain as the main area for expansion.