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


Business | Business Analytics


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 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.