EBK FUNDAMENTALS OF CORPORATE FINANCE
3rd Edition
ISBN: 9780133762808
Author: Harford
Publisher: PEARSON CUSTOM PUB.(CONSIGNMENT)
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Question
Chapter 22, Problem 1CC
Summary Introduction
Merger:
A merger can be defined as an agreement that unifies two existing firms into a single new firm. Mergers can be of different types and can occur due to different reasons. However, the primary reasons why mergers and acquisitions occur are to expand the reach of a firm or diverse the firm into divisions or earn more profits.
To determine:
The concept of merger waves.
Expert Solution & Answer
Answer to Problem 1CC
Merger waves are peaks of heavy activity followed by quite troughs of certain transactions.
Explanation of Solution
Merger waves can be defined as peaks of major activities carried down by a firm followed by quiet troughs of a limited number of transactions. Such activities are in correlation with the bull market and occur primarily in economic expansion as compared to economic contractions.
The presence of merger waves was first noticeable about due to the economic expansions that occurred during the time. The economic and technological conditions that were chiefly responsible for the expansion in the economy are most likely the drive peaks in these merger activities.
Consider the chart given below to analyze the merger waves in the economic history across the world.
| Period | Name | Aspect |
|---|---|---|
| 1897-1904 | First Wave | Horizontal Mergers |
| 1916-1929 | Second Wave | Vertical Mergers |
| 1965-1969 | Third Wave | Diversified conglomerate mergers |
| 1981- 1989 | Fourth Wave | Hostile takeovers, Corporate Raiding |
| 1992 - 2000 | Fifth Wave | Cross-border mergers |
| 2003 - 2008 | Sixth Wave | Shareholder Activism, Private Equity |
Table-(1)
Conclusion
Hence, it can be concluded that merger waves are peaks of heavy activity followed by quite troughs of certain transactions.
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Chapter 22 Solutions
EBK FUNDAMENTALS OF CORPORATE FINANCE
Ch. 22 - Prob. 1CCCh. 22 - Prob. 2CCCh. 22 - Prob. 3CCCh. 22 - Prob. 4CCCh. 22 - Prob. 5CCCh. 22 - Prob. 6CCCh. 22 - Prob. 7CCCh. 22 - Prob. 8CCCh. 22 - Prob. 9CCCh. 22 - How can a hostile acquirer get around a poison...
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