Mergers and Acquisitions

Chapter 1. Merger and Acquisition Overview^[1]

Introduction

Historically, mergers and acquisitions (M&As) have always been a factor in the expansion and consolidation of the modern industrial base of the United States and other advanced economies. However, over the last decade or so, M&As have emerged as a particularly significant market force. This trend is reflected in the volume of M&A activity, measured in terms of both dollars and the number of transactions consummated. The dollar volume of M&A activity in the United States exceeded $1 trillion in 1998 and has reached or exceeded that benchmark almost every year since. During that same period, the number of announced M&A transactions has consistently exceeded 7,500 annually.

Understandably, the largest of these transactions, large public company combinations, have been the most visible. These large transactions typically entail enormous transfers of value and affect thousands of employees and hundreds of thousands of investors. However, smaller transactions, such as those involving the sale of closely held businesses and the divestitures of business units—usually to larger, publicly traded companies—dwarf the number of combinations involving publicly traded entities.

Although these smaller transactions generally fall under the radar of the financial press and the casual business observer, they have consistently accounted for over 90% of all transactions by volume for the last several decades. They are clearly an important source ...