Scribd
Upload
63 views2 pages

History of Merg-WPS Office

The document discusses the history of mergers and acquisitions in five waves from the late 19th century to early 21st century. The first wave from 1897-1904 consisted mainly of horizontal mergers between monopolistic industries like railroads and electricity. Most failed due to economic slowdown and lack of supportive legal framework. The second wave from 1916-1929 focused on oligopolies and was enabled by infrastructure growth. Industries like metals, food, and chemicals merged. The wave ended with the 1929 stock market crash. The third wave from 1965-1969 comprised mainly conglomerate mergers inspired by high stock prices and lax antitrust laws. It ended as antitrust enforcement increased in the late 1960s. The fourth wave from 1981-1989 saw

Uploaded by

Muhammad Imran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
63 views2 pages

History of Merg-WPS Office

The document discusses the history of mergers and acquisitions in five waves from the late 19th century to early 21st century. The first wave from 1897-1904 consisted mainly of horizontal mergers between monopolistic industries like railroads and electricity. Most failed due to economic slowdown and lack of supportive legal framework. The second wave from 1916-1929 focused on oligopolies and was enabled by infrastructure growth. Industries like metals, food, and chemicals merged. The wave ended with the 1929 stock market crash. The third wave from 1965-1969 comprised mainly conglomerate mergers inspired by high stock prices and lax antitrust laws. It ended as antitrust enforcement increased in the late 1960s. The fourth wave from 1981-1989 saw

Uploaded by

Muhammad Imran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
You are on page 1/ 2

History of mergers and acquisitions

Tracing back to history, merger and acquisitions have evolved in five stages and each of these are
discussed here. As seen from past experience mergers and acquisitions are triggered by economic
factors. The macroeconomic environment, which includes the growth in GDP, interest rates and
monetary policies play a key role in designing the process of mergers or acquisitions between companies
or organizations.

First Wave Mergers

The first wave mergers commenced from 1897 to 1904. During this phase merger occurred between
companies, which enjoyed monopoly over their lines of production like railroads, electricity etc. the first
wave mergers that occurred during the aforesaid time period were mostly horizontal mergers that took
place between heavy manufacturing industries.

End Of 1st Wave Merger

Majority of the mergers that were conceived during the 1st phase ended in failure since they could not
achieve the desired efficiency. The failure was fuelled by the slowdown of the economy in 1903 followed
by the stock market crash of 1904. The legal framework was not supportive either. The Supreme Court
passed the mandate that the anticompetitive mergers could be halted using the Sherman Act.

Second Wave Mergers

The second wave mergers that took place from 1916 to 1929 focused on the mergers between
oligopolies, rather than monopolies as in the previous phase. The economic boom that followed the post
world war I gave rise to these mergers. Technological developments like the development of railroads
and transportation by motor vehicles provided the necessary infrastructure for such mergers or
acquisitions to take place. The government policy encouraged firms to work in unison. This policy was
implemented in the 1920s.

The 2nd wave mergers that took place were mainly horizontal or conglomerate in nature. Te industries
that went for merger during this phase were producers of primary metals, food products, petroleum
products, transportation equipments and chemicals. The investments banks played a pivotal role in
facilitating the mergers and acquisitions.

End Of 2nd Wave Mergers

The 2nd wave mergers ended with the stock market crash in 1929 and the great depression. The tax
relief that was provided inspired mergers in the 1940s.

Third Wave Mergers


The mergers that took place during this period (1965-69) were mainly conglomerate mergers. Mergers
were inspired by high stock prices, interest rates and strict enforcement of antitrust laws. The bidder
firms in the 3rd wave merger were smaller than the Target Firm. Mergers were financed from equities;
the investment banks no longer played an important role.

End Of The 3rd Wave Merger

The 3rd wave merger ended with the plan of the Attorney General to split conglomerates in 1968. It was
also due to the poor performance of the conglomerates.Some mergers in the 1970s have set
precedence. The most prominent ones were the INCO-ESB merger; United Technologies and OTIS
Elevator Merger are the merger between Colt Industries and Garlock Industries.

Fourth Wave Merger

The 4th wave merger that started from 1981 and ended by 1989 was characterized by acquisition targets
that wren much larger in size as compared to the 3rd wave mergers. Mergers took place between the oil
and gas industries, pharmaceutical industries, banking and airline industries. Foreign takeovers became
common with most of them being hostile takeovers. The 4th Wave mergers ended with anti takeover
laws, Financial Institutions Reform and the Gulf War.

Fifth Wave Merger

The 5th Wave Merger (1992-2000) was inspired by globalization, stock market boom and deregulation.
The 5th Wave Merger took place mainly in the banking and telecommunications industries. They were
mostly equity financed rather than debt financed. The mergers were driven long term rather than short
term profit motives. The 5th Wave Merger ended with the burst in the stock market bubble.

You might also like