Question 19 (6 points) Each of the following describes basic characteristics of

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Question 19 (6 points) Each of the following describes basic characteristics of one of the merger waves that ocurr years. For each, indicate which merger wave is being described by writing (Note: there may be more than one instance of the same merger wave.) I 1 Sometimes called the first 'anti-merger wave [J Predomi nantly conglomerate mergers following the passage of the Celler-Kefauver Act o1 end of the 19th century, into the carly 20th century, and ending with the Tich man's panic of 1907 [ 1 Ended with the housing crash and the beginning of the Great Recession I J Characterized by top management of productive corporations beginning to see their companies as 'mutual J Predominantly vertical mergers, ending at the outset of the Great Depression funds with smokestacks'. Occurring at the height of the era of managerial capitalism

Explanation / Answer

1St

Some time Called first anti merger Wave

The first merger wave, which began in1893, was associated with the theme of

"Merging for Monopoly." The characteristics of this phase were horizontal

mergers in the basic manufacturing and transportation industries; dominated

by large steel and railroad mergers. The first wave saw the landmark consolidation of 10 companies to form US Steel. The first wave came to an

end in 1907 as a result of factors such as, the failure of majority of mergers as

they couldn't achieve increase in efficiency, economic recession of 1903, stock market crash of 1904, and US Supreme court's ruling in 1904 that Sherman Act could be used to attack anti-competitive mergers.

2nd

Predominantly vertical merger ending at the outset of great depression

The second merger wave, which existed between 1919-1929, was associated

with the theme of "Merging for Oligopoly." Characteristics of the second wave were: fewer monopolies, more oligopolies, vertical mergers, and conglomerates. Primary metals, petroleum products, food products, chemicals, and transportation equipment were the most active M&A industries. Vertical integration became common during this merger wave. The reasons for the end of this phase were: October 29, 1929 stock market crash, and the Great depression.

3rd

predominantly Conglomerate meeger

The third merger wave, which existed between 1945-1973, is known as

"Conglomerate Merger." Characteristics of the third wave conglomerate

mergers and equity-financed mergers were: investment banks not playing a

central role, aerospace being the most active industry, while industrial

machinery, auto parts, railway equipment, textiles, and tobacco being active.

The reasons for the end of the third wave were cited to be: crack down on

conglomerates in 1968, legislation (Williams Act, Tax Reform Act, poor

performance by many conglomerates, sharp fall in DJIA, and the beginning of the energy crisis worldwide.

4th Occuring at the height of the area of managerial capitalism

The fourth merger wave, which existed between 1981-1989, is known as "The Mega merger," or "Takeover" wave. Characteristics of fourth wave were - size and prominence of acquisition targets were much greater than before; oil and gas industries were dominant in early 1980s while pharmaceuticals became most common in late 1980s. Hostile mergers were dominant during this phase. The fourth wave came to an end as a result of the following factors - legislation (Financial Institutions Reform, Recover, and Enforcement Act (1989), and State anti-takeover legislation), and the Gulf war.

5th Rich man painc

The fifth merger wave, which existed between 1992-2000, is known as "Strategic restructuring." Major characteristics of this wave were emphasized

longer-term strategy rather than immediate financial gains, more often financed with equity than debt, and consolidation in the telecommunications

and banking industries. The reasons for the end of this wave can be cited to be: bursting of stock market bubble, and economic slow-down. Cross-border

transactions dominated this wave which was led by the path-breaking revolutions in the areas of technology and communications, aided by the advent of Internet.

6th Great Recession

The sixth merger wave, which existed between 2002 and 2007, began with a

boom in global economies. Cross-border mega-mergers were the flavour of

this merger wave, and consolidation was witnessed across industries such as

steel, pharmaceuticals, banks and airlines. Indian and Chinese Companies

joined the party during this time with some of the biggest cross-border deals

like Tata Steel - Corus, Arcelor - Mittal and IBM – Lenovo. The wave ended

towards the end of 2007 with the onset ofsub-prime crisis leading to global

recession.

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