The first wave occurred from 1890’s to 1905 during the era where consolidation converted oligopolistic and competitive industries into near monopolies. A monopolistic market stated evolving as a result of many industry consolidations as well as horizontal mergers. Mergers did not occur because companies wanted to achieve economies of scale; rather they were created by companies that wanted to have an increased market power. The first merger wave occurred as a result of legal reasons. Several corporation laws were quite relaxed and this made corporations better able to secure capital, hold stock in other corporations and expand their business operations and this created a fertile environment for the creation of mergers. The second wave took place in the 1920’s and it was followed by the implementation of anti-monopoly legislation and it included motives for the creation of oligopolies of competitive ventures. The market crash of the 1929 resulted in an abrupt end to this wave and it took close to thirty years before the …show more content…
The booming economy of this period eased the appearance of a new merger wave. As a result of the tougher antitrust legislation, mergers that reduced competition significantly were illegal and therefore the companies that were in search of growth opportunities had to follow a diversification strategy. Close to 80 percent of mergers in this period were conglomerate mergers (Gaughan 2007). Because the interest rate for credit financing during this time was high while equity markets were facing a boom, most of the mergers ended up being financed through equity. Acquisitions were also fuelled through the possibility of accounting manipulations that temporary supported the stock value and also by the use of convertible debentures instead of stock