Keywords

M&A, mergers and acquisitions, M&A activity

Disciplines

Business | Business Analytics

Abstract

After a multi-year lull, merger and acquisition activity has started again to pick up speed. In 2004, the value of global M&A activity grew 40% to just under $2 trillion, compared to $833 billion in 2003. This is the first time the market has seen such growth since 1998 when it increased 80% from 1997. M&A activity in the post-millennium years weakened because investors were jittery after the dot.com bust and September 11 attacks in the United States. By 2005, it seemed that much of that fear had abated, as M&A activity was strong through June. There were more large deals in 2004 as well, such as Sprint Corporation’s purchase of Nextel Communications Inc. for $46 billion and J.P. Morgan Chase’s acquisition of Bank One for nearly $60 billion. But now in the last quarter of 2005, other shocks may affect business activity generally and M&A activity in particular. For example, what will be the effect of Hurricane Katrina and higher oil prices on future M&A deals? Depending on what turns the US and world economies take, the storm that crushed New Orleans and the Gulf Coast – and its ripple effects on the economy -- may reverse the M&A rebound. In this article, we discuss factors that encouraged M&A activity to bounce back, analyze why recent European M&A activity is more successful than past activity, revisit reasons CEOs pursue M&As, present reasons for cautions, review determinants of a successful merger or acquisition, make suggestions for CEOs considering M&A, and, finally, discuss possible effects of Hurricane Katrina on M&A activity in the next year or two.

Original Citation

Goldberg, S. R., Sanchez, C. (2006). M&A Update: Will the Rebound Stumble? The Journal of Corporate Accounting & Finance, 17(2), 3-7. https://doi.org/10.1002/jcaf.20176

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