That need for globalization is one of the driving forces behind the mergers. And as markets become more global, there is more competition, even for big companies. Another force behind, the mergermania is the deregulation of many markets, such as telecommunications, electricity and transportation, that has unleashed pent-up demand to grow companies by combining them. As always, those who propose mergers also are motivated by a belief they can save money by eliminating duplicative services and personnel, as well as taking advantage of economies of scale. Two companies with half-empty warehouses, for instance, can merge and sell off one of the facilities, said Scott Perlman, chairman of the Antitrust and Trade Section of the Federal Bar Association.
Bad mergers happen because the two companies, by merging, can manage to avoid some competition.
Unlike past merger trends, this one involves companies in complementary businesses that think they can find synergies. The urge to merge has swept the nation periodically, beginning with the last century. That trend toward monopolies left Congress, specifically worried about the power of oil and railroad companies to dominate the economy, to pass the Sherman Antitrust Act in 1890. The next wave during the Roaring Twenties led to oligopolies and more regulation. Then, beginning in the 1960s, companies began forming very diverse conglomerates by piecing together companies that didn't always have anything in common.