20.1AHistory of Mergers and Acquisitions

Merger and acquisition (M&A) activity has increased substantially since the mid-1960s.

In 1967, the total dollar value of all corporate mergers and acquisitions was under $20

billion, by 1984 this grew to a total dollar volume of $100 billion and by 1998 the dol-

lar volume exceeded one trillion.

Exhibit 20.1 graphs the total market value of completed mergers and acquisitions

in each year from 1967 to 1999. The exhibit shows that the size of M&Aactivity started

to increase substantially around 1980. There was a slowdown in this market starting

around 1989, but by 1992 the takeover market was again on the upswing and it was

strong throughout the 1990s, virtually exploding in the mid-1990s.

Grinblatt1398Titman: Financial	V. Incentives, Information,	20. Mergers and	© The McGraw1398Hill
Markets and Corporate	and Corporate Control	Acquisitions	Companies, 2002
Strategy, Second Edition

	Chapter 20Mergers and Acquisitions	693
EXHIBIT20.1	DollarVolume of Mergers and Acquisitions by Year

1500

1400

1300

1200

Total value offered (in $billions)

1100

1000

900

800

700

600

500

400

300

200

100

0
1967	19701973197619791982198519881991199419972000

Source: Mergerstat Review and W. T. Grimm.

The increased takeover activity that started in the 1980s can be attributed to a num-

ber of factors, most notably the emergence of the high-yield (junk) bond market that

was used to finance a number of the acquisitions, and the permissive stance toward

mergers by the Justice Department during the Reagan administration. In addition, major

changes in certain industries, such as increased foreign competition and the deregula-

tion of transportation, communications, and financial services, brought about a need for

a change in the way companies do business. The temporary decline in M&Aactivity

at the end of the 1980s coincided with a recession and the collapse of the junk bond

market.

Exhibit 20.2 lists the largest mergers before the year 2000. There are two interest-

ing things to note from this exhibit. The first is that none of the “largest mergers of all

time” listed in the last edition of this text is on the list. These “mega-mergers” are all

very recent. The second thing to note is that these are all horizontal mergers, involv-

ing firms in the same industries. In particular, these large mergers created some of the

largest oil and telecommunications companies in the world as well as the largest

financial services companies in the United States.

Grinblatt1400Titman: Financial	V. Incentives, Information,	20. Mergers and	© The McGraw1400Hill
Markets and Corporate	and Corporate Control	Acquisitions	Companies, 2002
Strategy, Second Edition

694Part VIncentives, Information, and Corporate Control

EXHIBIT20.2Largest Mergers in the Last Millennium

		Price Offered	Year
Buyer	Seller	(Millions)	Announced

PfizerWarner-Lambert	$82,399.6	1999
ExxonMobil	$81,429.8	1998
SBC CommunicationsAmeritech	$75,233.5	1998
Vodafone GroupAirTouch Communications	$62,768.0	1999
British Petroleum CoAmoco	$56,482.0	1998
AT&TMediaOne Group	$55,795.4	1999
Bell AtlanticGTE	$52,845.8	1998
AT&TTele-Communications	$52,525.6	1998
NationsBankBankAmerica	$43,158.3	1998
WorldComMCI Communications	$42,459.2	1997
Travelers GroupCiticorp	$36,031.6	1998
Qwest Communications IntlUS West	$34,748.0	1999
ViacomCBS	$34,454.0	1999
NorwestWells Fargo & Co	$31,660.2	1998
Daimler-BenzChrysler	$31,156.0	1998

Source: Mergerstat Review.