Question 11.S-tQ.4: Explain why acquisitions occur in waves.

There is no consensus view on why mergers and takeovers come in waves, but a number of contributory factors have been identified:

• a bull market can encourage the use of shares to finance takeovers;
• increasing liquidity and profitability can encourage companies to look for acquisition targets;
• deregulation of financial markets has made access to finance easier;
• low levels of gearing allow companies to use debt to finance acquisitions.