The Merger and Acquisition Market
The sixfold growth in merger and acquisition volume from $25 billion in 1979 to $156 billion in 1989 was one of the most dynamic and noteworthy trends of the decade. 1 Similar merger explosions only occurred at the turn of the century, in the 1920s, and in the 1960s. The academic literature has debated whether the motives behind it were rationalizing industry and displacing inefficient management or executive self-aggrandizement or wealth transfers that created stockholder value at the expense of other stakeholders such as bondholders, employees, and communities. I propose to leave this issue until volume 2, when I can deal with the decade as a whole, and for the moment focus on the forces that struck practitioners at this early stage -- a dramatic change in antitrust regulations by the Reagan administration, the dynamics of the oil industry, unprecedented leverage opportunities offered by the banks and the junk bond market, and the peculiar American institution of corporate raiders.
The new antitrust atmosphere permitted the number of mergers of $1 billion or more to rise from three in both 1979 and 1980 to nine in 1981 and nineteen in 1984, while the number of public companies acquired during 1981-1984 was actually 8.5% fewer than under President Carter. Among the ten largest transactions in 1984, 84% by value would have been subject to antitrust challenge without a change in the government's attitude.
Mergers and acquisitions related to the oil industry rose from 11% to almost one-third of the merger activity between 1979 and 1984 and were the hothouse for techniques employed elsewhere. At first, oil-related ac-