Merger and Acquisition Vol. 1

Nothing is sweeter than sharing. Nothing is more fruitful than converging and nothing rules the world more than cooperation. Our Indian culture had taught us the story of fighting cats and monkey and we are the perfect example of being divided and ruled. However any coordination without meeting of mind and soul is useless. And sometime being separate can be better than living together. The concept of Merger acquisition and corporate restructuring derives it life from the basic culture of being together or being separate.

It was year 1838 when of the first few merger of World’s history took place. It can easily be first ever merger but I don’t have convincing data to support that. The first merger of Rail Road industry in 1838 was between Wilmington &Susquehanna and Baltimore & port deposit which lead to the formation of Philadelphia, Wilmington and Baltimore.   This merger even though small in nature; led to beginning of an era and concept which lead to many mergers and establishment of monopoly in many established industries.

The world’s history of merger and acquisition has been divided into six phases or six waves. During these periods we saw immense surge in the M& A deals. You can attribute these waves to many factors or many time combinations of economic, technological and regulatory shocks.  The economic shocks, like recession and economic slowdown tends to make certain companies redundant. Sometime over competitiveness in industry and price wars make certain companies less financially viable. However, more often these shocks lead to horizontal merger than vertical merger.  The merger wave in 1897 was result of Panic and mild recession post 1896. Such economic shocks challenges ability to run business on own and this merger and acquisition are sought to ease operational constraint and increase profitability.

The regulation shocks or easement is also a factor calling for merger as waves. Many a time many probable merger and acquisition are in abeyance cause of regulatory pressure and is simulated once these regulations are quashed with time.  Earlier US Banks were not allowed to cross state lines or enter other industries. One it was eased out we saw many banks spending their fins. Citi Bank had been one of the largest banks across globe by around more than 150 M&A deals since inception.

The technological shocks which makes many products outdated in sudden turn has been one of the causes of M & A. recent time has seen landline being redundant and spurge in popularity of smart phones. Some similar shift or shocks which make cost of production cheaper may make many companies redundant and thus we see a surge in M&A.