U.K and Merger Waves

Unlike USA which saw many waves of M&A UK was rather silent. Some mergers took place but it was never a significant wave despite having no serious anti monopoly laws. Most of the firms were held by government and UK was growing using colonization.

First significant but very small wave took place in UK in 1920 when mass production technology was introduction in USA post WWI. Increased productivity reflected in stock price which lead to mergers resulting in concentration of manufacturing industries.

In 1948 monopolies and restrictive policy act was passed and being vague it was of no use. First real merger wave came in 1960s when internationalization was happening and government realized that Firm needs to be larger to survive the impending competition. Based on that government created industrial reorganization committee (IRC) was formed to promote merger and organization. Of large 200 companies around 20 % were involved in M&A activity post IRC. Even though it was not large but still by UK history it was significant. Merger and monopolies acts and commission were created to check any merger and acquisition that is against public interest. Most of the Horizontal mergers were in the purview of MMC. However deals backed by IRC were waived from the check resulting in many mergers that could else have been in purview of MMC.

The office of fair trade was established to look in merger and acquisition taking place around and those that have to be recommended to MMC supervision. Most of these merger and acquisition were horizontal in nature but slowly it moved to conglomerate formation with time.

Another wave was post 1980s when most of merger and acquisition shifted their focus from increasing capacity or size of firms to use the asset and firms as commodity. Since MMC chose to ignore most or mergers that could have been under its purview many horizontal mergers continued. Financial service industry was deregulated, stock market was rising and balance sheet was growing and thus it was good for M&A. Merger and acquisition saw increasing hostility, use of leverage or debt and buy outs as an impression from USA. Even after stock exchange crash of 1987 there was continuous merger and acquisition till 1989.

As most of government owned firms were under deregulation and privatization in 1990 a new wave erupted when british telecom, british rail and british gas were being privatized. This resulted in major corporate restructuring at various levels of industries and thus merger wave occurred.