What are Merger Waves

Merger waves are periods of increased merger and acquisition activity. Numerous things can cause merger waves, ranging from market conditions, sociological factors, and technological advancements. There have been a total of six major merger waves since the start of the 1900s. Some may even say, we’re in the seventh merger wave now.

Merger Waves Throughout History

• 1897 - 1904: Frequently referred to as the monopoly wave. There was an effort to consolidate multiple small companies for monopolistic purposes. As a result, this merger wave mainly affected the manufacturing industry. This merger wave ended due to a stock market crash and new regulations for monopolies. 
• 1916 - 1929: Horizontal mergers in the manufacturing industry and an overall shift towards vertical integration led to the oligopoly wave. Vertical mergers that aim for higher efficiency became popular for organizations seeking higher productivity. The end of WWI drove this merger wave, and the stock market crash of 1929 ended it. 
• 1965 - 1969: Post-war growth opportunities opened up for the conglomerate wave. Mergers and acquisitions focused on expanding and diversifying through conglomerate mergers, rather than the vertical and horizontal mergers of the past. Antitrust enforcement and the recession of 1971 led to this merger wave ending.  
• 1981 - 1990: Leveraged buyouts and private equity groups rose in popularity during the refocusing wave, due to falling interest rates and capital market deregulations. This wave affected nearly every industry. Hostile deals took place between large companies and small businesses. The savings and loan crisis, as well as the 1990 recession, led to the end of this merger wave.
• 1993 - 2000: The strategic wave took off as a result of falling interest rates and a desire for expansion. An increase in globalization marks the start of international mergers and acquisitions, such as Vodafone and AirTouch Communications. Many deals completed during this time had valuations in the billions. Even with these large deals, the dot-com bubble resulted in many established companies filing for bankruptcy.
• 2004 - 2007: Due to a shift in antitrust laws and a further increase in globalization, the sixth wave occurred. Private equity firms were most impacted in this wave. The Global Financial Crisis and the Great Recession caused it to end.

Why Do Merger Waves Matter?

In 2021, Financier Worldwide argued the uptick in global merger activity was evidence of a potential seventh wave. However, this increase in M&A activity was not consistent enough long-term to be considered a merger wave. By taking a look at past merger waves, we can more accurately predict when the next may occur. Using our knowledge of the past while watching current M&A trends may lend you some insight towards the future’s possibilities.

Interested in the M&A process, but unsure it’s the right path for you? Contact us to speak with one of Stony Hill’s expert advisors today.