A 120-Year Perspective on Mergers & Acquisitions

The cover story in a recent issue of The Human Factor magazine (published in New Delhi, India) was an article I wrote charting the major peaks in merger activity over the past 100 years.  These six episodes show how M&A comes in waves, with periodic bursts of deal-making.

The chart below gives a timeline and brief description for each of these surges in deal traffic during the 20^th century. 

The shocks that trigger merger waves are usually economic, regulatory, or technological changes.  For example, abrupt economic swings, whether favorable or unfavorable, will be exploited by opportunistic companies.  Deregulation often releases pent-up demand.  Major technological changes require firms to redeploy assets.  In each of these situations, mergers help companies adapt to the new environment.

Granted, not all shocks that hit the business world give birth to a merger wave.  There also has to be enough capital liquidity to finance an unusual number of deals.  In fact, if macro-level liquidity is high, that itself can produce a merger wave even in the absence of industry shocks.

The major obstacle to global M&A these days is market volatility.  Even though many corporations have unusually large stashes of cash on hand, pervasive uncertainty and global instability limit executives’ willingness to take on the risks of mergers and acquisitions.

But you can bet on this:  Given a better line of sight into the future, buyers will be quick to pounce.