The 1980s merger wave: an industrial organization perspective

Why are we in the midst of one of the largest merger waves in United States history? Answering this question is not an easy task. The answer requires a thorough understanding of what motivates mergers, a topic that continues to be hotly debated. In addition, one must identify economic and financial changes that both coincide with the current merger wave and reinforce one or several merger motives. An even more difficult task would be the construction of a general theory of merger waves that applies not only to the current and past U. S. merger waves, but also to concurrent and previous waves in other countries. Having posed a difficult question, this paper will seek a less than ideal answer.1 The focus will be on the extent of current knowledge and the identification of topics where further research is needed. The first section evaluates the magnitude of the current merger wave relative to previous waves. The next section describes and interprets 11 major findings from the research on the motivations for mergers. Macroeconomic and microeconomic changes that may provide a catalyst for the current wave are discussed in the third section, followed by the conclusions of this paper.

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