Merger Movements - Comfori Workshop

Merger generally occured in Waves. Each merger wave was characterized by a particular type of merger (horizontal, vertical & conglomerate). Merger movements coincide with high rates of economic growth and particular developments in business environment. Why need merger? The firms are not motivated to make large investments when business prospects are not favorable.

First Merger Wave (1897 - 1907)

First merger wave happened based on Depression of 1883. About 2/3rd of all merger activity was concentrated in petroleum products, mining, metals, food products and transportation. The types of merger that be apply at that time is a horizontal mergers. Horizontal merger means joint venture between 2 companies producing similar goods / offering similar services. Easy to say the merger can be known as monopolies. 

Second Merger Wave (1916 - 1929)

It happened during World War I and continued until the stock market crash of October 29, 1929. The types of merger that be applied is more on vertical mergers. Vertical merger can be defined as 2 companies producing different goods / services for one specific finished product. 

Third Merger Wave (1965 - 1969)

The types of merger that be applied is a conglomerate mergers. Conglomerate mergers be known as firms that are involved in totally unrelated business activities. At that time, the strong economy gave many firms the resources necessary to acquire other companies. 

Fourth Merger Wave (1981 - 1989)

Most mergers that occured during the fourth merger wave were "friendly". This period included many hostile takeovers than previous merger waves. At that time, debt was more widely used to finance mergers.

Fifth Merger Wave (1993 - 2000)

This merger wave followed the economic recession of 1990 - 1991. Large mergers occured at about the  same level as they had during the fourth merger wave; but hostile takeover activity diminished. Many of mergers of the fourth wave were executed for short-term financial gains, mergers of this period emphasized longer term business strategies.

From Poonam Mehra, National Institute of Securities Markets



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