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Recent Trends and the Performance Record of Mergers and Acquisitions
After recovering from the market meltdown at the start of the decade, global M &A activity reached
an all-time high in 2007, before declining significantly in both the number and dollar value of M&A
transactions with the financial crisis of 2008 (see Exhibit 17.2). Exhibit 17.3 lists the 10 largest M&A
transactions since 2000.
The upturn in M&A activity in 2004 coincided with an increased role for private equity firms. After
accounting for less than 3% of M&A volume between 1996 and 2003, PE deals surged to almost onequarter
of all M&A activity in the second quarter of 2007 (see Exhibit 17.4). This jump was due in
part to the ready availability of cheap debt, a critical component of most highly leveraged PE
transactions. Exhibit 17.4 also shows the predictable impact of the 2007-2008 credit crunch on PE
deals.
The historical volume of deal making might lead one to assume that mergers and acquisitions are an
easy way for corporate managers to create value for their shareholders. To assess this, we now
examine the empirical evidence on mergers and acquisitions. Let‟s begin with the wealth of academic
studies that analyze M&A performance. 2
Exhibit 17.2 Global M&A activity, 2000-2008.
Source: Wall Street Journal, January 2, 2009; data from Dealogic.
Exhibit 17.3 Largest M&A deals, 2000-2008.
Source: http://watchmojo.com/web/blog/index.php/2008/01/09/largest-internet-ma-deals-of-all-time/,
January 12, 2009.