Business Tips: Merger and Acquisition Activities Explained

Introduction

Merger and acquisition or M&A activities have been conducted throughout the world with the intention of creating synergy among the merging firms. Merger and acquisition between large firms usually totaled up to billion of dollars spent in the effort. M&A promises benefits such as further promoting the business growth or investment strategy to the merging firms.

Numerous example of large merging activity could be drawn by looking at the history of M&A activities in the United States as it has been categorized in their history as the five waves of merging activities.

The first wave of merger activity was predominantly horizontal mergers. The first wave was deemed as the "merger for monopoly" by George Stigler, a Nobel Prize winning economist. The large monopoly mergers has further implication to the industry in the United States as it has dramatically affected small firms in certain industrial area to wither. This was the case where the steel industry has been badly affected where only one firm survived in the onslaught of the historical corporate world.

The second wave, however, was focused on merging with firms to form oligopoly. During this period, many firms consolidated and has been given ample opportunity to further expand their business due to the economic boom as the result of the after effect of World War 1.

During the third wave of merger in the history of the United States, most of the merger comprise of conglomerate type of merger. These firms were determined to set out to further diversify their line of products. Their efforts were further supported by the booming economy where revenues continued to flow into the company.

The fourth wave of merger on the other hand mostly comprise of hostile takeovers where corporate raiders have played a significant role. Corporate raiders would take over a firm where it would be a norm for that particular firm to have been underperforming and plague with huge amount of debt. The corporate raiders would then reform the firm and finally resell it at a higher price.