Chapter 2

Merging for Monopoly

Merging for Oligopoly

Merging for Conglomerate

Hostile & Mega Mergers

Finance, Telecom & Media Mergers

Leveraged Mergers

International & Tax Mergers

-3 Types of shocks:

• Economic shock

• Technological shock

• Regulatory shock

-Sufficient capital liquidity

-Horizontal mergers

-Monopoly Merger Wave

-Sherman Act of 1890 —> didn’t impede mobopolistic combinations

-Justice Department didn’t have resources

-Development of Transportation System

-Specialization of Management

-Facilitated by cooperation among businesses

-Investment bankers funded mergers

-Most mergers were horizontal

-Mergers were characterized by EOS

-Wave ended with Stock market Crash 1929

-Industries with most mergers: Metals, Petroleum & Food

-Conglomerate Era —> long economic expansion

-Companies were prevented by antirust enforcement from buying in same industry

-Only alternative: acquire outside of industry

IT&T —> classic conglomerate

-Price / Earnings

-Price: 100 & Earnings: 10 —> P/E = 10

-Inco vs. ESB

-1st hostile takeover by major firm

-Supported by Morgan Stanley

1981-1989

-Mayn hostile mergers

-Larger targets

-Industry trends like oil

-Deregulation

-Antitakeover strategies

-Role of Investment bankers

-Many leveraged buyouts

1994-2001

-Roll-ups & consolidations of industries

-Industries —> failed to deliver promised gains like lower costs

-Market enthralled with consolidating deals

-Large roll-ups: Metal USA, Office Products USA

Consolidate through larger scale of acquisitions of companies

1897-1904