Background
One of the many enduring puzzles in corporate finance has been the need and outcome of the M&A (merger and acquisition) activities during different times. Generally, history is not discussed in detail for corporate finance owing to the changing market dynamics; however, M&A activities are different in terms of learnings they bring forward.
A merger involves a combination of two existing companies into one single entity. Mergers attract consolidation of the industry since it is assumed to be the easiest and most cost effective way of expansion or diversification for any organization.
‘In 2015, there was a record $4.30 trillion worth of mergers and acquisitions announced. Deal making continues to be a popular way to grow revenue and …show more content…
There have been many researches on the mergers wave and articles written over the five major M&A waves starting from 1897. As the technological advancement were introduced and innovations started taking front seat in organizations, the reasons, structures and objectives behind M&A started changing.
Back in 1900, it started with horizontal mergers, with a view of consolidation within industries. It moved from horizontal to vertical mergers in somewhere around 1965 wherein the target firms were quite smaller to the bidder and objective was not only to go for horizontal or vertical mergers to gain business hold, but to create conglomerate which had versatile interest in many businesses.
The fourth merger wave, as defined by many scholars happened during 1984-89. This period saw a cultural shift in M&A activities wherein hostile takeovers became an acceptable form of expansion. Though the total percentage of such takeover was not much, it did set a trend for upcoming merger activities. Markets also saw the availability of debt financing for mergers, causing leveraged deals to start more frequently. While such bidding was present previously, this changed the corporate management …show more content…
Many large corporates took their chances with mergers as part of inorganic growth strategy. Now the mergers were more of strategic reasons and synergies were found in the prospects before taking any decisions. However, things were not going great and in search of synergies, especially when acquiring firms lost around $240 billion for their shareholders over the 1998–2001 periods. ‘During the recession of 1991-92 that followed the first boom in private-equity deals—which were known at the time as leveraged buy-outs—many of the firms that had been bought at the top of the market ended up in bankruptcy, unable to finance all the debt that had been used to buy them.’ (The Economist,
One of the many enduring puzzles in corporate finance has been the need and outcome of the M&A (merger and acquisition) activities during different times. Generally, history is not discussed in detail for corporate finance owing to the changing market dynamics; however, M&A activities are different in terms of learnings they bring forward.
A merger involves a combination of two existing companies into one single entity. Mergers attract consolidation of the industry since it is assumed to be the easiest and most cost effective way of expansion or diversification for any organization.
‘In 2015, there was a record $4.30 trillion worth of mergers and acquisitions announced. Deal making continues to be a popular way to grow revenue and …show more content…
There have been many researches on the mergers wave and articles written over the five major M&A waves starting from 1897. As the technological advancement were introduced and innovations started taking front seat in organizations, the reasons, structures and objectives behind M&A started changing.
Back in 1900, it started with horizontal mergers, with a view of consolidation within industries. It moved from horizontal to vertical mergers in somewhere around 1965 wherein the target firms were quite smaller to the bidder and objective was not only to go for horizontal or vertical mergers to gain business hold, but to create conglomerate which had versatile interest in many businesses.
The fourth merger wave, as defined by many scholars happened during 1984-89. This period saw a cultural shift in M&A activities wherein hostile takeovers became an acceptable form of expansion. Though the total percentage of such takeover was not much, it did set a trend for upcoming merger activities. Markets also saw the availability of debt financing for mergers, causing leveraged deals to start more frequently. While such bidding was present previously, this changed the corporate management …show more content…
Many large corporates took their chances with mergers as part of inorganic growth strategy. Now the mergers were more of strategic reasons and synergies were found in the prospects before taking any decisions. However, things were not going great and in search of synergies, especially when acquiring firms lost around $240 billion for their shareholders over the 1998–2001 periods. ‘During the recession of 1991-92 that followed the first boom in private-equity deals—which were known at the time as leveraged buy-outs—many of the firms that had been bought at the top of the market ended up in bankruptcy, unable to finance all the debt that had been used to buy them.’ (The Economist,