CHAPTER 2 U.S. M&A History, Trends, and Differences from Other Nations

The U.S. M&A market is more advanced than those of other countries, and, as a result, the United States has a disproportionate share of transactions. The reasons behind the disparity are covered in this chapter.

In my travels, I have given M&A seminars on several continents. Inevitably, the attendees want to know how their local market stacks up against the United States, where the M&A business is highly advanced.

U.S. M&A History

To give the response some context, a review of the U.S. market’s 120-year evolution is helpful. Historians and M&A experts identify six merger waves.

First Wave: 1895–1907

The first wave saw a horizontal M&A boom, as larger enterprises gobbled up their smaller competitors. Monopolistic firms, such as U.S. Steel and Standard Oil, became dominant, with a number later broken up by newly empowered antitrust authorities. The wave ceased with the financial panic of 1907.

Second Wave: 1920–1929

Vertical mergers gained popularity, as firms integrated backward by buying supply sources or forward by acquiring distributors. Holding companies assembled many individual electric utilities into vast corporations. A decade of economic prosperity saw new technologies, such as commercial radio broadcasting, and higher stock prices propelling M&A volume. The wave ended with the 1929 stock market crash.

Third Wave: 1960–1970

With the introduction of modern portfolio theory in the 1950s, ...

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