ABSTRACT
Economic historians have identified several waves of merger activity that have influenced the structure of American industry. There are three broad categories of mergers: horizontal, vertical, and conglomerate, each with differing motivations and welfare effects. Horizontal mergers involve firms that are direct competitors prior to the merger. Vertical mergers involve firms that produce at different stages of production in the same industry. Conglomerate mergers involve companies that operate in either different product markets or the same product market but different geographic markets. Some empirical evidence suggests that around the time of a merger, the acquired firm experiences a significant increase in the value of its stock, which results in large capital gains for the stockholders of the acquired company. In large measure because passage of the Celler-Kefauver Act in 1950 made horizontal mergers subject to effective legal challenge, this merger wave differed from the earlier two waves in that the vast majority were conglomerate mergers.
