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• Mergers occur in waves – about 40% of all deals
– Four major waves with peaks in 1900, 1927, 1970 and 2000 – Three minor waves with peaks in 1919, 1948 and 1986
• Why do they occur?
– Shifts in the rules of competition in some industries
• Product or process innovations
– Telecommunications, software, pharma, energy
• Input shocks
• Regulation (usually deregulation)
– Banks, railroads, trucking, electric ulilities, airlines
– Stock market booms which make acquirers feel rich – Top management optimism
M & A Truisms • Standard conjectures about equity market returns – Total return is positive – Target firm shareholders typically benefit from being acquired – Acquiring firm shareholders are likely to benefit when: • Deals are made with cash • Targets are private .