The Six Major “Merger Waves”
There have been six merger waves in the historical mergers. Yong Rin (2011) contends that the first four merger waves were centered in the U.S. while the fifth and the sixth involved Europe and Asia. These six merger waves shared common features that they all occurred in cyclical patterns and ended with a stock market crash. What follows is the detail of each merger wave.
First wave – 1897 to 1904
The first merger wave took place after the depression of 1883, peaked in 1899 and lasted until 1904. The mergers during that time were characterized by horizontal consolidations in metals, food products, petroleum products, chemicals, coal, transportation equipment, and machinery industry. Gaughan (2011) says this merger wave played a role in creating large monopolies. Remarkably, people witnessed the first billion-dollar megamerger merger when U.S. Steel was combined with Carnegie Steel leading to a foundation of a steel giant conglomerate of 785 separate firms which accounted for 75 percent of U.S. steel-making capacity. The lax enforcement of federal antitrust laws was blamed for the thriving of the first wave. The Sherman Antitrust Act enacted in 1890 was unable to control this period of intense mergers. Also, investment bankers also played an aggressive role in promoting the merger activities.
Second wave – 1916 to 1929
The second merger wave occurred during the World War I, and paved the way for the stock market crash of 1929 and the Great Depression of the 1930s. The second wave was predominantly driven by vertical mergers that resulted in the oligopoly. Industries having the most mergers were primary metals, petroleum products, food products, chemicals, and transportations equipment. Many prominent corporations were born during this merger period namely General Motors, IBM, John Deere, and Union Carbide. In 1914, the Clayton Act was passed to reinforce the antimonopoly provisions of the Sherman Act. The antitrust environment, by and large, was more stringent
First wave – 1897 to 1904
The first merger wave took place after the depression of 1883, peaked in 1899 and lasted until 1904. The mergers during that time were characterized by horizontal consolidations in metals, food products, petroleum products, chemicals, coal, transportation equipment, and machinery industry. Gaughan (2011) says this merger wave played a role in creating large monopolies. Remarkably, people witnessed the first billion-dollar megamerger merger when U.S. Steel was combined with Carnegie Steel leading to a foundation of a steel giant conglomerate of 785 separate firms which accounted for 75 percent of U.S. steel-making capacity. The lax enforcement of federal antitrust laws was blamed for the thriving of the first wave. The Sherman Antitrust Act enacted in 1890 was unable to control this period of intense mergers. Also, investment bankers also played an aggressive role in promoting the merger activities.
Second wave – 1916 to 1929
The second merger wave occurred during the World War I, and paved the way for the stock market crash of 1929 and the Great Depression of the 1930s. The second wave was predominantly driven by vertical mergers that resulted in the oligopoly. Industries having the most mergers were primary metals, petroleum products, food products, chemicals, and transportations equipment. Many prominent corporations were born during this merger period namely General Motors, IBM, John Deere, and Union Carbide. In 1914, the Clayton Act was passed to reinforce the antimonopoly provisions of the Sherman Act. The antitrust environment, by and large, was more stringent
References: Yong Rin, P. (2011). Global M&A Market Outlook and Its Implications. Retrieved from http://www.kcmi.re.kr/Eng/cmweekly/down1.asp?num=58&seq=1&filename=(2011-1213)Weekly_eng.pdf Gaughan, P.A. (2011). Mergers, Acquisitions, and Corporate Restructurings.5th edition. Wiley. Chand, G. (2009). Mergers and Acquisitions: Issues and Perspectives from the Asia-Pacific Region. Asian Productivity Organization, 2009. Retrieved from http://www.apo-tokyo.org/publications/files/ind-38-m_a.pdf Reybern, S. (2010). The 12 Biggest Mergers in American History. Retrieved from http://www.billshrink.com/blog/6834/the-12-biggest-mergers-in-american-history