Page 68 - Azerbaijan State University of Economics

N.V. Abdullayeva: Value creation through mergers and acquisitions in energy sector

Reid (1968), Lintner (1971), Lynch (1971), Markham (1973), Steiner (1975),

Scherer and Ross (1990), Hubbard and Palia (1999), and others. The fourth and fifth

waves together with previous ones, were analyzed by Ravenscraft (1987), Andrade

et al. (2001), Holmstrom and Kaplan (2001), Jovanovic and Rousseau (2002) or

Harford (2005), correspondingly.

The first merger wave arose with the completion of transcontinental railway

system and lasted from 1897 to 1904. This movement formed the first common

market that in turn fostered monopolies. According to Fligstein (1990), between

1895 and 1904, 78% of the mergers were horizontal, 10% horizontal and vertical,

the remainder vertical. Most of horizontal mergers took place in steel, oil and basic

manufacturing industries (Ribeiro, 2010).

Innovation in automobile and radio in 1920s gave companies the possibility to

advertise their products and services organize the distribution channel and expand

geographic sales. In this period it was crucial for the companies to manage their

distribution channels in effective way, that is why this wave is characterized by vertical

mergers. It was ceased by economic shock of 1929.

The third merger wave known as ‗conglomerate‘ one is characterized by

conglomerate mergers in late 1960s. The aim of companies was to reduce expenditures

and diversify. According to Weston (2001) in every sample of conglomerates, at least

one half of the companies were aerospace or natural resource-depleting companies (oil

and forest).

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