Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
Fundamentals of Corporate Finance (3rd Edition) (Pearson Series in Finance)
3rd Edition
ISBN: 9780133507676
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
Question
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Chapter 22, Problem 2CT
Summary Introduction

Merger:

A merger can be defined as an agreement that unifies two existing firms into a single new firm. Mergers can be of different types and can occur due to different reasons. However, the primary reasons why mergers and acquisitions occur are to expand the reach of a firm or diverse the firm into divisions or earn more profits.

Merger waves:

Merger waves can be defined as peaks of major activities carried down by a firm followed by quiet troughs of a limited number of transactions. Such activities are in correlation with the bull market and occur primarily in economic expansion as compared to economic contractions.

The presence of merger waves was first noticeable about due to the economic expansions that occurred during the time. The economic and technological conditions that were chiefly responsible for the expansion in the economy are most likely the drive peaks in these merger activities.

To determine:

The reasons for merger cluster in time causing merger waves.

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