M&A - the Genesis

The expansion of mergers and acquisitions (M&A) is not a recent phenomenon. After the nineteenth century, the fundamental structure of M&A emerged. Mergers and acquisitions in India have a long history in India, stemming from strategic partnerships between kingdoms for commerce and gaining control of the nation. Among the BRICS countries, India is the second most popular destination for M&A.

M&As in India follow their own patterns, which are influenced by a variety of variables including government regulations, trade cycles, and the political climate. When planning mergers and acquisitions among organizations and enterprises, the macroeconomic environment, such as GDP growth, interest rates, and monetary policies, often plays a major influence. In general, the history of M&A transactions in India may be divided into five waves, with the timeline allowing us to comprehend the incidence of M&A as well as the strategic motives that underpin both waves.

First Wave Mergers

The primary first wave commenced from 1897 to 1904. The mergers that occurred in this period were mostly initiated by businesses that worked over the productions of railroads, electricity and manufacturers. The productivity combination took place in main industries that were the originators in the oil, mining and steel industries. The pattern of horizontal mergers amongst heavy manufacturing industries leads to the establishment of monopolies.

The majority of the mergers that occurred in the first wave ended in failure since the companies could not attain the desired efficiency since the legal framework around M&A was not supportive to the companies involved, creating more conflict. This failure was fired up by the slow momentum of the economy in 1903 followed by a stock market crash of 1904. The Supreme Court passed the mandate that anticompetitive mergers should be stopped.

Second Wave Mergers

The second wave of mergers that took place from 1916 to 1929, whether the principal combination movement was amongst the production of food, iron, printing etc. Unlike the focus monopolies as in the previous phase, the second wave focused on the mergers between oligopolies. World War II helped provide the economic boom that was required to give rise to such mergers. Technological developments like the development of railroads and motor vehicle transportation provided the necessary infrastructure for such mergers to flourish in the market.

The government policies in the second wave encouraged firms to work in unison. The second wave was initiated by an era of war on humanity, of profitable recovery and greater than ever concerns about monopoly power. In contrast to the initial wave, this wave characterizes itself as an initiator of oligopolies.

Third Wave Mergers

The mergers that took place during this period (1965-69) was mainly signified by the occurrence of conglomerate mergers. The Great Depression and the Second World War significantly slowed down the activities on the M&As in the market. Mergers in this phase were initiated in the 1950s and were inspired by high stock prices, higher interest rates and the diligent enforcement of laws with additional restrictions that required to put a stop to anti-competitive mergers and acquisitions. Mergers in this phase were financed through investment banks and equities. But conglomerate mergers in this phase performed poorly and were thus ended by the Attorney General in 1968.

Fourth Wave Merger

The fourth wave of mergers, which began in 1981 and ended in 1989, were distinguished by acquisition targets that were far bigger than those of the previous wave. Bids in this period were often hostile, meaning they did not include management consent from the target. Second, the terminal dimension was noticeably better than the previous wave. In addition, the primary sources of financing switched from justice to debt and money. Mergers and acquisitions occurred in the oil and gas, pharmaceutical, banking, and airline industries. Foreign takeovers were commonplace, with the majority of them being hostile. Anti-takeover regulations put a stop to the 4th Wave mergers.

Fifth Wave Merger

Globalization, the stock market boom and deregulation prompted the 5th Wave Merger (1992-2000), which took place after liberalization. Due to the economic reforms implemented in India, the 1990s were a decade of great financial viability for the country. The banking and telecoms industries had the most mergers during the fifth wave. They were largely funded with cash rather than debt. The mergers were motivated by long-term goals rather than short-term profits. The fifth wave of mergers came to an end when the stock market bubble crashed. As a result, we might infer that mergers and acquisitions have taken a long time to develop. Economic markets were thriving, and a globalization strategy was taking shape.

The current is defined by the unofficial Sixth Wave. Globalization has been introduced, with reputable corporate businesses prioritizing the construction of multi-national tech reach. As shareholders, day-to-day management, and institutional investors compete for control of their firms, markets have been rising. Globalization, the stock market boom and deregulation prompted the 5th Wave Merger (1992-2000), which took place after liberalization. Due to the economic reforms implemented in India, the 1990s were a decade of great financial viability for the country. The banking and telecoms industries had the most mergers during the fifth wave. They were largely funded with cash rather than debt. The mergers were motivated by long-term goals rather than short-term profits. The fifth wave of mergers came to an end when the stock market bubble crashed. As a result, we might infer that mergers and acquisitions have taken a long time to develop. Economic markets were thriving, and a globalization strategy was taking shape.

The current period is defined by the unofficial Sixth Wave. Globalization has been introduced, with reputable corporate businesses prioritizing the construction of multi-national tech reach. As shareholders, day-to-day management, and institutional investors compete for control of their firms, markets have been rising.

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This is the second article in a series on many interesting aspects of Mergers and Acquisitions by our student researchers, Amrutha Alapati, Annapurna Prabhu, Astha Agarwal, Aradhya Singh, Swasti Patoria and Aayomi Sharma.

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