Merger and acquisition activity is the statistical reflection of the various ways to reshuffle "business assets " among competing management teams. In perfect long-run equilibrium, each asset, alone or combined with other assets, will be owned and controlled by the team that places the highest value on it. So, in response to the question, "What causes today’s merger boom? " we should look to recent economic shocks in the market for corporate control. A moderately informed observer can point to several legal, economic, and regulatory shocks that might imply wholesale reshuffling of corporate assets among competing management teams. Innovations in the financial markets, the subject of this paper, have played an important and high-profile role in the story of recent merger activity. The considerable media fascination with such financial innovations as junk bonds, poison pills, and lock-ups is due to their being convenient targets of attack in the political arena, where a flat-earth type debat
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