The recent financial crisis brought a tsunami effect to the banking industry globally resulting in
the bankruptcy being filed by those who were considered as the leaders and looked upon by
the world to make and formulate new banking strategies. The financial crisis also brought
down the number of merger and acquisitions drastically from 15400 deals in 2007 to 9700
deals in the year 2009 amounting to approximately US $1800bn. M&A is a major common phenomenon in the financial industry and is done for many reasons which will be explained in details later on in this essay.
M&A have been seen to have a major impact on the financial markets and today M&A are
scoring much higher deal values than they ever have before.
Debates have questioned whether M&As deals played a part in maximizing the wealth of
shareholders. Some think that M&A is just a way of expanding a firm’s business or improve the
wealth of shareholders. However, others have stated that M&As result in a slowdown of
technological progress since companies are less inclined to create innovation.
A merger or acquisition happens when two or more companies unite together, often to split costs,
boost efficiency or gain market power. Mergers and acquisitions, often referred to as M&A’s, is also
a way of expanding a business or avoid different laws or regulations such as tax laws or monopoly
regulations (Ross, Westerfield & Jaffe, 2002).
Nevertheless, it is not a new phenomenon. It is not even a phenomenon of the 20th century. The first mergers began in the second half of the 19th century, sometimes having the purpose to expand
market share almost to a point of having a monopolistic market power. This was known as the first
M&A wave in the United States, but also as the start of mergers around the world (Mueller, 2003).
A second M&A wave took place after World War I in the 1920s and was seen as a...