Chapter 22: Firms, managers and restructuring: implications of a social economics view
Mergers and acquisitions (M & A) appear to have become a standard feature of modern capitalism in the Anglo-Saxon world and continental Europe. Since 1900, there have been six general M & A waves. The late-1920s wave, as well as the last two waves, growing in force between 1995–2000 and 2003–2008 respectively, have perhaps been the most exuberant. With average expenditures of more than US$1000 per annum, and many acquisitions exceeding US$50 billion in value, the two most recent waves caught many headlines in the newspapers. During M & A waves, firms on average spend much more than they do on fixed capital formation or research and development (R & D). For example, during the fifth wave business enterprise investments in acquisitions were no less than about eight times higher than business enterprise expenditures on R & D. The sixth wave, while aspiring to similar numbers as the fifth, had different characteristics, however. Similar to the fourth wave (taking place during the 1980s), a disproportionately large number of its acquisitions were leveraged buy-outs (LBOs), or in more modern parlance, private equity leveraged buy-outs (PELBOs). Many, if not most, of such buy-outs do – or are supposed to – create value from demerging previously formed concentrations, indicating a sort of continuous stop–go process, or as I would suggest and will elucidate in this chapter: indicating a restructuring wave.
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