The field of mergers and acquisitions has undergone tumultuous changes over the past four decades. The fourth merger wave of the 1980s featured a fascinating period of many hostile deals and leveraged buyouts along with many more “plain vanilla” deals. The 1990s witnessed the fifth merger wave—a merger wave that was truly international in scope. After a brief recessionary lull, the merger frenzy began once again and global megamergers began to fill the corporate landscape. This was derailed by the subprime crisis and the Great Recession. When the economic recovery was initially slow, so too was the rebound in M&A activity. However, by 2013 and 2014, M&A volume rebounded strongly and has continued in the years that followed.

Over the past quarter of a century, we have noticed that merger waves have become more frequent. The time periods between waves also has shrunken. When these trends are combined with the fact that M&A has rapidly spread across the modern world, we see that the field is increasingly becoming an ever more important part of the worlds of corporate finance and corporate strategy.

As the field has evolved we see that many of the methods that applied to deals of prior years are still relevant, but new techniques and rules are also in effect. These new methods and techniques consider the mistakes of prior periods along with the current economic and financial conditions. Participants in M&As tend to be an optimistic lot and often focus on the upside of deals while avoiding important issues that can derail a transaction. There are many great lessons that can be learned from the large history of M&As that is available. What is interesting is that, as with many other areas of finance, learning from past mistakes proves challenging. Lessons that are learned tend to be short-lived. For example, the failures of the fourth merger wave of the 1980s were so pronounced that corporate decision makers loudly proclaimed that they would never enter into such foolish transactions. However, there is nothing like a stock market boom to render past lessons difficult to recall while bathing in the euphoria of rising equity values.

The focus of this book is decidedly pragmatic. We have attempted to write it in a manner that will be useful to both the business student and the practitioner. Since the world of M&A is clearly interdisciplinary, material from the fields of law and economics is presented along with corporate finance, which is the primary emphasis of the book. The practical skills of finance practitioners have beenintegrated with the research of the academic world of finance. In addition, we have an expanded chapter devoted to the valuation of businesses, including the valuation of privately held firms. This is an important topic that tends not to receive the attention it needs, as a proper valuation can be the key between a successful and a failed transaction. Much of the finance literature tends to be divided into two camps: practitioners and academicians. Clearly, both groups have made valuable contributions to the field of M&As. This book attempts to interweave these contributions into one comprehensible format.

The increase in M&A activity has given rise to the growth of academic research in this area. In fact, M&A seems to generate more research than other areas of finance. This book attempts to synthesize some of the more important and relevant research studies and to present their results in a straightforward and pragmatic manner. Because of the voluminous research in the field, only the findings of the more important studies are highlighted. Issues such as shareholder wealth effects of antitakeover measures have important meanings to investors, who are concerned about how the defensive actions of corporations will affect the value of their investments. This is a good example of how the academic research literature has made important pragmatic contributions that have served to shed light on important policy issues. It is unfortunate that corporate decision makers are not sufficiently aware of the large body of pragmatic, high-quality research that exists in the field of M&A. It is amazing that senior managers and the boards regularly approve deals or take other actions in supporting or opposing a transaction without any knowledge on the voluminous body of high-quality research on the effects of such actions. One of the contributions we seek to make with this book is to render this body of pragmatic research readily available, understandable, and concisely presented. It is hoped, then, that practitioners can use it to learn the impacts of the deals of prior decision makers.

We have avoided incorporating theoretical research that has less relevance to those seeking a pragmatic treatment of M&As. However, in general, much of M&A research has a pragmatic focus. For decision makers, this research contains a goldmine of knowledge. The peer-reviewed research process has worked to produce a large volume of quality studies that can be invaluable to practitioners who will access it. We have endeavored to integrate the large volume of ongoing research into an expansive treatment of the field. The rapidly evolving nature of M&As requires constant updating. Every effort has been made to include recent developments occurring just before the publication date. We wish the reader an enjoyable and profitable trip through the world of M&As.

Patrick A. Gaughan