Mergers and Acquisitions History

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Most of the mergers and acquisitions are an outcome of the favorable economic factors like the macroeconomic setting, escalation in the GDP, higher interest rates and fiscal policies. These factors not only trigger the M & A process but also play an active role in laying the mergers and acquisition strategies between bidding and target firms.

The history of mergers and acquisitions can be traced back to the 19th century which has evolved in different phases mentioned as under:

From 1897 – 1904

During this period merger took place between the firms which were anti-competition and enjoyed their dominance in the market according to their productivity in sectors like electricity, railways, etc. Most of the mergers during this period were horizontal in nature and occurred between the steel, metal and construction industries.

From 1903 – 1905

Most of the mergers which took place during the first phase were considered as unsuccessful for not being efficient enough to attain the required competence. The crash was stimulated by the decelerating of the world's financial system in 1903, which was followed by a stock market collapse in 1904. During this phase the authorized structure was not encouraging either. Later the apex judiciary body issued its directive on the anti-competitive mergers stating that they could be de-merged by implementing the Sherman Act.

From 1916 – 1940

Unlike the preceding phase, this period concentrated on mergers between oligopolies, rather between anti-competitive firms. The mergers and acquisitions process was triggered by the financial boom which was seen after the World War I. The expansion further lead to developments in the fields of science and technology and the emergence of infrastructure firms which provided services for required growth in railroads and transportation by automobiles. The government strategies laid in 1920s made the corporate ambiance supportive enough for firms to work in harmony. Financial institutions like government and private banks also played a significant part in aiding the mergers and acquisitions process.

The mergers which occurred during 1916-1929 were horizontal or multinational in nature. Most of these industries were the manufacturers of metals, automobile tools, food commodities, chemicals, etc.

This phase ended in 1929 with a massive decline in stock market followed by great depression. However, the tax exemptions in 1940s encouraged the conglomerates to involve themselves in M & A activities.

From 1965 – 1970

Most of the mergers from 1965-70 were horizontal mergers and were triggered by elevating stock and interest rates, and stern implementation of anti-trust rules and regulations. During this phase the bidding companies were small in size and fiscal strength than the target companies. These kinds of mergers were sponsored by equities, thereby eliminating the roles of banks which they actively played in investment activities earlier.

In 1968, the Attorney General decided to break the multinationals which resulted in the end of merging activities after than. The decision was triggered by the inefficient performance of the multinationals. But 1970s saw the emergence of mergers which made their mark by performing effectively. Some of them were INCO merging with ESB, OTIS Elevator with United Technologies and Colt Industries with Garlock Industries.

From 1981 – 1989

This phase saw the acquisition of the companies which were much bigger in size as compared to the firms in previous phases. Industries like oil and gas, pharmaceuticals, banking, aviation combined their business with their national and international counterparts. Cross border buyouts became regular with most of them being unfriendly in nature. This phase came to an end with the introduction of anti acquisition laws, restructuring of fiscal organizations and the Gulf War.

From 1992 till present

This period was stimulated by globalization, upsurge in stock market boom and deregulation policies. Major mergers were seen taking place between telecom and banking giants out of which most were sponsored by equities.

There was a change in the attitude of the industrialists, who opted for mergers and acquisitions for long term profitability rather than short lived benefits. Promising economic trends, investments by corporate and revised government policies motivated the participation of many conglomerates to contribute in the acquisition trend.

Therefore, we can conclude that as long as business entities exist and the economic factors are favorable, the trend of mergers and acquisitions will continue.