MERGER AND THE ECONOMY

MERGER WAVES
 Merger comes in the waves. The first episode of intense merger
activity occurred at the turn of the twentieth century and the
second in the 1920s. thee was a further boom from 1967 to
1969 and then again in the 1980’s and 1990s.
 If mergers are prompted by economic motives, at least one of
these motives must be here today, gone tomorrow” and it must
somehow be associated with high stock prices. But none of the
economic motives that we review in the material has anything
to do with the general level of the stock market. None of the
motives burst on the scene in 1967, departed in 1970,
reappeared for most of the 1980s, and reappeared again in the
mid-1990s.
 Some of the mergers may result from mistakes in valuation on
the part of the stock market, which means the buyer may
believe that invertors have underestimate the value of the
seller or may hope that they will overestimate the valure of the
combined firm.
 During the 1980s merger boom, only the very largest
companies were immune from attack from a rival management
team for example in 1985 PANTRY PRIDE, a small super market
chain recently emerged from bankruptcy, made a bid from the
cosmetics company Revlon. Revlon’s assets were more then
five times those of pantry pride.
 The mid-90s stock markets and mergers were booming again.
LBOs remained out of fashion, and relatively few mergers were
intended simply to replace management. Companies began to
look once more at the possible benefits from combining two
businesses.
 DO MERGERS GENERATE NET BENEFITS?

ADVANTAGE OF MERGER

 Reduction of cost of operations.

 Financial inclusion.

 Bigger scales of Experties.

 Disparity of wages

 Large project will be assigned.