The activity in mergers and acquisitions in the past century shows a clustering pattern. The clustering pattern is characterized as a wave and they occur in burst interspersed with relative inactivity. When we discuss these merger waves, economics usually refer to 6 specific waves starting from 1890. Rise in Mergers and acquisition activity coincided with better economic conditions and technological advancements. Whereas end of waves were earmarked by recessions and wars. North America in general and the USA in particular have been historically considered the most active M&A region in the world for first four waves of the past century. Especially in wave five and six, besides US, UK and continental Europe, Asia also had a significantly increased M&A market. And was referred to as era of global consolidation. 

The first wave of consolidation (Monopolistic) (Horizontal Integration) (1890—1904)

The first wave followed after a period of economic expansion, and an important characteristic was the simultaneous consolidation of manufacturers within one industry. 

Most mergers and acquisitions were carried out according to the horizontal integration principle (accounting for over 78 % of deals). Horizontal merger/acquisition implies a merger of companies specializing in the same type of production, sale and consumption of similar products, or providing similar services. Monopoly dominated virtually in all branches. Monopoly being a state where businesses gain exclusive control of a commodity or service in a particular market and are in position of setting the market prices discouraging consumer rights. Government in 1890 introduced the Sherman Antitrust Act 1, which limited cartels and monopolies, was passed but it was not yet clear in the beginning so the direct impact was limited. In the first place, laws on incorporation were evolving and were implemented more rigorously at the end of the nineteenth century.

The first wave peak occurred during the 1898 — 1902 period, as M&A activities were inherent to all economy branches like steel-making, food branch, petroleum industry, machine building industry. A distinctive feature of the agreements during this period was their multilateral nature: 75 % of M&A deals involved at least 5 companies, whereas regarding 26% of cases this number increased to 10 or more participants. As a result of consolidation in certain industries such giants as Standard Oil Co., British American Tobacco and General Electric Co. were established. The first wave ended in 1904 with the stock market crash.  

The second wave of consolidation (Oligopolistic) (Vertical Integration) (1916—1929)

The second wave was caused by the investment capital influx to the stock markets as a result of the economic boom following World War I combined with favorable economic conditions. The second merger wave started in the 1916s, where the primary focus of merger activity was in the food, paper, printing and iron industry but the wave was significantly smaller in magnitude than the first wave.

M&A deals during this period were mostly of vertical nature. As opposed to the first wave, this wave characterizes itself as a creator of oligopolies. At the end of the wave, industries were no longer dominated by one large corporation, but rather by two or more. In addition to Sherman Act, that came into force during second wave of mergers and acquisitions, Clayton act was also passed in 1914 to check anti-competitive behavior, price discrimination and discouraged acquiring of large stakes in competing companies.

Vertical mergers/acquisitions imply mergers of companies specializing in different (most often — sequential) types of production, sale and consumption of similar products/services. The economic intention of such mergers mainly implies reduction of transaction costs (e.g. merger of an air carrier company and a travel agency). An example of vertical integration would be purchase by Ford Motor Co. of a major part of companies supplying spare parts and expendables for production of cars during the said period. 

The end of the second merger wave was caused by the market crash of 1929 which started the"Great Depression‟ which led to a world-wide depression in the following years.

The third wave of consolidation (conglomerate) (Diversification) (1965—1973)

The new wave started only in the 1950‟s, after it was slowed down due to the "Great Depression‟, Second World War, and more restrictions which needed to prevent anti-competitive mergers and acquisitions. This resulted in the development of a new business organization. Mergers in the first and second wave usually involved horizontal (wave 1) or vertical (wave 2) integration, but the third wave gave rise to the concept of diversification.  

The method of diversification led to the rise of conglomerates, which are large corporations that consists of numerous businesses not necessarily related. Example of a conglomerate is General Electric, which has interest in a vast number of businesses including healthcare, transportation and energy. 

According to the FTC (Federal Trade Commission) estimations, during 1965 to 1975, 80 % of M&A deals entailed formation of conglomerations, whereas the number of "pure conglomerate" M&A deals increased from 10.1 % (1948— 1955) to 45.5 % (1972—1979). At the same time, the number of horizontal mergers decreased significantly from 39% (1948—1955) to 12% (1964—1971). The third merger wave slowed down and the end of the 1970s and collapsed completely in 1981 when there was an economic recession due to a significant oil crisis.

The fourth wave of consolidation (The wave of corporate incentives) (Hostile and Leveraged Buyout (1981—1989)

The fourth merger wave started in the 80s, and was quite different then its previous one. Foremost, the bids were usually hostile which meant that the bids did not have the target's management approval. Second, the size of the target was also significantly larger than in the previous wave. Furthermore, the dominant source of financing shifted from equity to debt and cash financing. A significant increase in the number and value of M&A deals in the early 1980s reflected profound changes in the economic and financial climate, which were characteristic for this period (significant role was played by the steadiness of the world economy growth process in 1982 — 1990).

The peak of activity occurred in 1984 — 1989, with the most pronounced tendency being rapid growth of hostile takeover share in the aggregate value of M&A deals (in some years reaching 25 %). Hostile takeover (unfriendly takeover) implies acquisition at which the acquiring company attempts to gain control of the target company by purchasing its shares in the market without consent of the top management or major shareholders of the latter.

Another feature of this period was related to the nature of the agreements, with widespreading megamergers/mega-acquisitions and the number of deals worth over USD 100 million increasing 24 times (1974 – 1986). Using debt obligations as a funding source for M&A deals (LBO deals) has become a norm for most of the participating companies. Leveraged buy-out implies purchase of the major share in the target company, which is financed by issuing new shares or by loans to be repaid by the acquiring company (its own assets serving as loan security). After 1989 M&A activity gradually slowed down and yet another stock market crash led to the end of the wave

The fifth wave of consolidation (The wave of international agreements) (1992—2000)

The fifth wave started due to technological innovations, i.e. information technology, and a refocus of corporations on their core competences to gain competitive advantage. The 1990s was a decade of great economic prospect. The financial markets were booming and a globalization process was developing. The merger activity also boomed in continental Europe where it almost equaled the US market. Due to globalization the number of crossborder acquisitions increased significantly. In order to keep up with the economic growth and the global opportunities, organizations searched outside their domestic borders to find a target company. Growth was an important driver for merger activity. Corporations wanted to participate in the globalization of the economy. This created some "mega‟ deals that were unthinkable before this wave. Some major mergers were: Citibank and Travelers, Chrysler and Daimler Benz and Exxon and Mobil. 

M&A waves took an international scale, since last 100-year long consolidation process, most sectors of the world economy headed by big international companies influenced the M&A process and dominated the market with mega-deals growth (if late in 1980s their share in the total value of international mergers/acquisitions was 40—42 %, then in 1998 it made 60%, and in 2000 — 75.7 %). The primary motive for the most part of merger/ acquisition deals during that period was the desire of transnational companies to ensure stability of their own development under the ever-changing market conditions.

The end of the wave was once again caused by an economic recession. The beginning of the new millennium started with the burst of the internet bubble, causing global stock markets to crash.

The sixth wave of consolidation (The wave of mega-deals) (LBOs) (2002-first half 2008)

The cheap money era led to the total domination of LBO type of deals (in 2005 annual average price of such a deal was at the level of USD 0.49 billion, whereas in two years it reached USD 1.3 billion). The leading sectors in terms of the megadeals number were pharmaceuticals industry (AventisSA acquired Sanofi-Synthelabo SA for USD 60.24 billion), powergenerating sector (merger between RoyalDutchPetroleum and ShellTransport & Trading worth USD 74.35 billion) and telecommunications sector (in 2006 AT & T (American Telephone and Telegraph Company acquired BellSouth Corp. for USD 72.67 billion).

During 2006 – 2007 it seemed that nothing could restrain the rapid growth in the number of LBO mergers/acquisitions agreements concluded. During these two years, the value of LBO deals amounted to USD 1.4 trillion, which is equivalent to one third of this type mergers/acquisitions deals concluded at all times. At the same time, many LBO-agreements of 2006 — 2008 show the following trend: stable growth in profits of target companies enabled the acquiring companies/initiating companies to improve their loan interest coverage ratio, while the share of hostile takeovers showed drastically rapid growth (from 4 % in 2000 to 20% in 2008) along with the possibility of "losing" the earning asset. At the peak of M&A activity in 2007, about 47 % of M&A deals were made in the USA and the Great Britain.

The onset of the global financial crisis in the summer of 2008 put an end to the "cheap loans" and led to circa 40 % collapse of M&A market to USD 2.5 trillion late in 2008. One of the first to suffer the global financial crisis effect was company Thomson Reuters, one of the largest news agencies in the world (established in 2007 as a result of Thomson Corporation from Canada acquiring British Reuters Group for USD 17 billion). Its net profit for the first half of 2008 fell by 38.9 % (to USD 367 million) along with a turnover increase by 43.1% (to USD 4.96 billion).