Surf's Up: A Process Explanation of the Great Merger Wave

Abstract

Merger and acquisition (M&A) waves can be value-creation opportunities, yet their occurrence remains a mystery to scholars and practitioners alike. The extant literature on M&A waves is mostly from psychology, economics and sociology. A study of The Great Merger Wave of 1898-1903 shows how severe price competition motivated business owners to earn abnormal returns via M&A, aided by investment banks profitably speculating on industrial securities issues with innovative M&A financing techniques, and abetted by the Federal government’s lax antitrust enforcement, leading to the phenomenon’s emergence. Using the process-tracing qualitative methodology, this study fosters a behavioral explanation of M&A waves, and may facilitate anticipation of future occurrences of these phenomena.

Keywords: Merger and acquisition, process tracing, Great Merger Wave, merger and acquisition waves, qualitative research