HISTORY OF MERGERS
Five periods of high merger activity, often called merger waves, have taken place in the history of the United States. These periods were characterized by cyclic activity, that is, high levels of mergers followed by periods of relatively fewer mergers. The first four waves occurred between 1897 and 1904, 1916 and 1929, 1965 and 1969, and 1984 and 1989. Merger activity declined at the end of the 1980s but resumed again in the early 1990s to begin the current fifth merger wave. The various merger waves provoked major changes in the structure of American business. They were instrumental in transforming American industry from a collection of small and medium-sized businesses to the current form, which includes thousands of multinational corporations.
This chapter focuses more closely on the later merger periods because they are, of course, more relevant to recent trends in the world of mergers. This is particularly the case starting with the fourth and fifth merger waves.
The first merger wave occurred after the Depression of 1883, peaked between 1898 and 1902, and ended in 1904 (Table 2.1 and Figure 2.1.). Although these mergers affected all major mining and manufacturing industries, certain industries clearly demonstrated a higher incidence of merger activity.1 According to a National Bureau of Economic Research study by Professor Ralph Nelson, eight industries—primary metals, food products, petroleum products, chemicals, transportation equipment, fabricated metal products, machinery, and bituminous coal—experienced the greatest merger activity. These industries accounted for approximately two-thirds of all mergers during this period.
The mergers of the fourth wave were predominantly horizontal combinations (Table 2.2 and Figure 2.2). The many horizontal mergers and industry consolidations of this era often resulted in a near monopolistic market structure. For this reason, this merger period is known for its role in creating large monopolies. This period is also associated with the first billion dollar megamerger deal when U.S. Steel, founded by J. P. Morgan, later joined with Carnegie Steel, founded by Andrew Carnegie, and combined with its other major rivals. The resulting steel giant merged 785 separate firms. At one time U.S. Steel accounted for as much as 75% of the United States' steel-making capacity.
1. Ralph Nelson, Merger Movements in American Industry: 1895–1956 (Princeton, N.J.: Prince-
ton University Press, 1959).
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Publication information: Book title: Mergers, Acquisitions, and Corporate Restructurings. Contributors: Patrick A. Gaughan - Author. Publisher: Wiley. Place of publication: New York. Publication year: 1999. Page number: 21.
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