Page 69 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.72, # 1, 2015, pp. 61-94

The fourth M&A movement was triggered by deregulation in various industries.

The top five industries in terms of M&A activity were oil and gas, textile,

miscellaneous manufacturing, non-depository credit and food (Andrade et al., 2001).

Remarkably, amount of deals during third wave exceed the one in fourth, but the

dollar value of the transactions that occurred in the 1980s was much higher. In

addition, this wave dismantled the diversification movement in 1960s (Ribeiro, 2010).

Overall the fourth wave is known for its billion –dollar mega transactions, many of

which were financed with large amount of debt (Mangold and Lippok, 2008). In

addition, international transactions accounted for a significant percentage of M&A

activity (Gaughan, 2002).

The fifth M&A wave was driven mainly by globalization. Unlike the precedent

wave, majority of the deals were financed through equity. The top five industries in

terms of M&A activity were metal mining, media and telecommunications, banking,

real estate and hotels (Andrade et al., 2001). This wave was ended by burst of the

―internet-bubble‖ and the overall downshift of the global economy in the following

years (Wübben, 2007).

2.3. Efficiency Rationale for M&A

There are various reasons behind M&A decision of companies. Those may be

split into two groups according to firms‘ objectives and goals in merging or

acquiring the target: value maximizing and non-value maximizing motives.

Efficiency rationale which originates from neoclassical theory of firm states that a

firm exists to maximize the wealth of its shareholders. (Gravelle and Rees (1981)).

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