Question

(CO A) Describe any two of the three major characteristics of the fifth merger wave of the 1990s.

Answer 1

Fifth Wave (1993-2000)

The ‘90s welcomed the entry of the “mega deals”, where businesses had displayed greater greed for bigger economies of scale. The result was the creation of multinational companies and conglomerates which have become massive. After all, they were of the belief that the bigger they are, the more dominant they will be in the market.

As such, foreign investors began entering the US market (and vice versa). The type of acquisition or merger that involves foreign investors obtaining controlling interest in the acquired or merged company became known as “cross-border mergers”. They involve two countries with the rules or laws of the Home Country (where the acquiring company is) prevailing over the acquisition and control of the acquired or merged company in the Host Country. This was seen by many businesses as the perfect opportunity to enter markets in other countries and establish dominance on an international and even global scale.

If you look at the biggest M&A deals in history, many of them took place during the Fifth Wave. One example of a cross-border merger is UK’s Vodafone AirTouch purchase of Germany’s telephone and internet giant Mannesman in 1999.

The gas and oil industry were also the ones that were active during this period, as seen in the merger of Exxon and Mobil, resulting in ExxonMobil, which is currently the largest oil refining company in the world. GlaxoSmithKline, on the other hand, was the result of the merger of Glaxo Wellcome and SmithKline Beecham, two of the top pharmaceutical companies in Europe at the time. Their merger easily made it one of the top pharmaceutical companies in the world.

But it’s not just the gas and oil industry that made a killing when the Fifth Wave rolled around. This was also when the historic merger of Daimler and Chrysler took place, as well as Ford’s acquisition of Volvo.

This wave didn’t last very long, either. It came in with a huge bang, but also went out fettered with scandals that involved the filing of bankruptcy of huge names such as Worldcom and Enron. The bursting of the dot-com bubble also sealed the deal.