Merger waves Flashcards
What are the 7 merger waves
1880s - 1904 - horizontal
1920s - vertical
1960s - conglomorate
80s - LBOs and divestitures
90s - Globalisation and strategic take over
10s - Tech an mega mergers
What are they key charateristics of Merger wave 1
-Firms were merging for monopoly
-Oligopolies were merging for monopoly, engaging in horizontal integration
-High industrial production
-Few merged firm control the majority of the market
-This wave was mainly centred around the manufacturing industry saw the rise of manufacturing and transportation giants in the United States, particularly in the industries of steel, oil, mining and railroads
What are they key charateristics of Merger wave 2
The second wave followed the post-WW1 economic boom and concerns over monopolies.
The first wave focused on horizontal mergers; the second emphasized vertical mergers to form oligopolies.
Antitrust regulations shifted mergers from horizontal to vertical integration.
Example: U.S. Steel, labeled a monopoly in 1911, shifted to vertical mergers.
These mergers aimed to reduce costs and improve efficiency rather than increase revenue.
Key industries: food, paper, printing, and iron; this wave was smaller than the first.
What are they key charateristics of Merger wave 3
The 1960s wave began amid stricter antitrust rules, leading to new business structures.
Unlike the horizontal (wave 1) or vertical (wave 2) mergers, the third wave introduced diversification.
Diversification spurred conglomerates—large firms with unrelated businesses.
Fortune 500 firms in unrelated industries grew from 9% to 21%, highlighting diversification’s importance (Sudarsanam, 2003).
What are they key charateristics of Merger wave 4
The 4th wave featured hostile takeovers and leveraged buyouts (LBOs).
Acquisitions relied on borrowed funds, using target assets as collateral.
Private equity firms and investment banks drove these deals.
Restructuring focused on cost-cutting, divestitures, and core business optimization.
Targets were larger; 28% of Fortune 500 firms were acquired between 1981-1989 (Shleifer & Vishny).
Divestitures made up 20-40% of M&A activity (Sudarsanam, 2003).
What are they key charateristics of Merger wave 5
This wave was characterised by the development of globalization and a technological revolution
This was the most global wave with EU activity almost matching that of the US. This encouraged cross-boarder mergers as companies saw the prospects of expanding into international markets
Large scale mergers dominated, with deals often exceeding a billion dollars, the aim was to create global market leaders and greater economies of scale
What are they key charateristics of Merger wave 6
Dominated by private equity and cross-border deals in emerging markets.
Focus on horizontal and vertical mergers in energy, finance, and telecom.
Fueled by high liquidity, low interest rates, and commodities boom.
Ended with the 2008 financial crisis.
What are they key charateristics of Merger wave 7
Tech-driven M&A focused on digital innovation and ecosystem building.
Mega-deals aimed at consolidation, particularly in tech, media, and healthcare.
Cross-border deals rose, but geopolitical tensions and regulatory scrutiny increased.
Private equity played a key role, fueled by low-interest rates.
Post-COVID, M&A was driven by digital transformation and supply chain adaptation.
What drove merger wave 3 ?
Economic
Post-WW2 economic growth and increasing antitrust regulations prompted U.S. companies to diversify into unrelated industries, as antitrust laws restricted mergers within the same sector.
Technological
Further advancements in automation
