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Few people have thought more deeply about mergers and acquisitions than Martin Lipton, who for decades was the managing partner of New York–based Wachtell, Lipton, Rosen & Katz. Lipton was a key player in the explosion of deals that ignited in the mid-’70s and, with a few recessionary breaks, grew in number and volume until 2008. Now 82, Lipton has participated in all four decades of that era: advising, advocating, developing tactical innovations, building the firm he co-founded. His own career rose on an ascending staircase of M&A transactions as he grew Wachtell Lipton into one of the most powerful — and most profitable — corporate law firms around.

Yet for all that success, for all his tactical brilliance, Lipton has for decades displayed ambivalence about the evolution of M&A. He has never reconciled himself fully to the shift from stakeholder to shareholder governance, and he has long decried the waste and destruction of M&A. For half a century he has been the most articulate, effective and controversial advocate for managerial and board prerogatives. And he is the master of corporate defense: His poison pill was a killer app of M&A from its invention in the early ’80s right through the ’90s.

Lipton’s view of how all this came to pass is subtle, even ironic. A series of proxy fights in the ’50s provoked 1968’s Williams Act, which regulated tender offers. “In large measure, the adoption of the Williams Act produced the patina of respectability to hostile tender offers they previously had not had,” he explains. “This graduated from a secondary activity into major investment banks prepared to engage in it. Ultimately, in 1974, Morgan Stanley advises [nickel mining giant] Inco to make a bid for [battery maker] ESB, opening up the business of hostile tender offers.” And so M&A was unleashed.

Today, Lipton observes an M&A business that is struggling to recover from the  financial crisis. Business is slow. Around him voices have begun to murmur that the modern era of M&A — the age of not only Lipton but Skadden Arps Meagher & Flom’s Joseph Flom, Lazard Frères’ Felix Rohatyn and Morgan Stanley’s Robert Greenhill; of raiders, greenmailers, activists and arbitrageurs; of private equity titans and daisy-chain transactions — might be over. Gloom prevails.

M&A has long been a business that runs on optimism. The effort required to buy another organization — negotiate a price, perform effective due diligence, resolve legal and regulatory requirements and defeat other bidders — is daunting and time-consuming, high drama and remarkable tedium. The machinery of M&A is large, complex and fragile, a fluid constellation of bankers, lawyers, accountants, consultants, corporate executives, directors and investors of all kinds. It is both a mechanism of change and an intricate set of financial, organizational and legal technologies. Perhaps the greatest and most commonly overlooked aspect of M&A happens when the deal is done: postmerger integration, or effectively knitting two corporate entities into one.

None of M&A is easy, and the risks are considerable — too large, apparently, for many companies still focused on disaster and seemingly content to accumulate cash, passing some of it to shareholders when they grow restive. This is a big change. The modern era of M&A, which began in the mid-’70s and was characterized by shareholder governance and deregulated markets, has been both cyclical and expansionary. Recessions reduced the size and number of M&A deals for two or three years only to see them roar back, each wave mightier than the last. What drove those successively higher waves was the expansion of M&A into the middle market and into the developed, then emerging, economies. Throughout this period M&A was broadly tamed and routinized, moving beyond an activity that once seemed to belong to cowboys, pirates or, most famously, barbarians.

Now, in a less than vigorous economy, M&A has sputtered, knocked back by uncertainties triggered by various macro and micro shocks. True, by 2013 those uncertainties no longer seemed to have the bite they had in 2009 or 2011. But despite positive financial developments — low rates, hot markets, cash-rich companies — 2013 looks like another disappointing year, salvaged only by some  megadeals that inflated volume figures but did little to hide the fact that the number of deals is down.

But don’t pronounce the end of an era too quickly. Although much has changed, the underlying reality — in many ways, the fundamental drive — of M&A has not. M&A will revive when both  companies and investors feel they have no other option for growth. That time is coming. Companies have struggled through the postcrisis period by cutting costs and stressing productivity; it’s been an impressive performance, but it’s one reason the economic recovery has not been stronger. Corporations and investors now hold record piles of cash — Boston-based Bain & Co. estimates more than $300 trillion globally available for investment — much of which has not gone into capital expenditures or M&A. Though profits remain high, revenue growth is feeling the strain. Eventually, many companies will have to turn to other sources of growth: new technologies, new businesses, new geographies, new products. M&A may be the only answer.

In the 1970s and ’80s, M&A dominated the headlines, with one spectacular and often hostile deal after another. M&A emerged as a powerful engine of restructuring and revival for a corporate sector widely viewed as sclerotic, shareholder-unfriendly and crippled by conglomerates. Beginning in the mid-’70s, deal activity and volume grew with machinelike regularity. M&A created a colorful language all its own — Saturday night specials, Pac-Man defenses, poison pills, white knights — and featured a cast of larger-than-life figures. After the ’80s ended in recession, scandal and Michael Milken’s fall, M&A staggered, only to bounce back a few years later — less scandalous but broader, deeper, more global — with steady year-on-year increases. A pattern was set: Each leg of M&A expansion was bigger than the last.

By the time the ’90s boom ended in the dot-com bust, few questioned whether M&A would revive once markets recovered. And it did a few years later; by the mid-2000s it was producing volumes driven by private equity. By then a cyclical but still-growing M&A regime was an integral part of an expanding global, market-oriented financial complex. A record $4.27 trillion in global M&A volume was generated in 2007 on more than 40,000 transactions.

Then came 2008. Wall Street all but collapsed. Recession and recrimination followed (see also “ Wall Street: No Firm Is Above the Law”). M&A imploded; private equity struggled to close — or escape — deals negotiated at the market top. By 2009 global volume had fallen by more than half from the peak, to $1.9 trillion, according to Thomson Reuters. Improvement came slowly. In 2011, U.S. M&A surged, only to tumble after the fiscal cliff; 2012 came in under that. In the first few months of 2013, after a handful of early deals — the proposed $24 billion Dell management buyout, Berkshire Hathaway’s teaming up with Brazil’s 3G Capital to buy H.J. Heinz for $23 billion and American Airlines parent AMR Corp.’s agreeing to merge with US Airways Group for $11 billion — the New York Times led its front page with a story headlined “ Confidence on Upswing, Mergers Make Comeback” (see also “ Top 10 Deals of 2013”).

Well, not yet. The rest of 2013 floundered, buoyed only by more megadeals, including Verizon Communications’ $130 billion acquisition of Vodafone Group’s stake in Verizon Wireless and Omnicom Group’s $35 billion merger with Publicis Groupe. By the summer deal activity was substantially down in the U.S., Europe and Japan. By the third quarter U.S. private equity activity was off 19 percent from 2012, though volume was up. Even sectors that had been hot — health care, technology, energy — struggled. Financial services M&A was moribund. The third quarter was the worst for completed volume globally in ten years.

Let’s be clear: M&A is hardly extinct. Instead, it has sunk to the levels of the early to mid-2000s. That’s a problem, at least for Wall Street. M&A activity is smaller than the industry that grew to service it, not just for big caps but across the middle market; not just in the U.S. but around the globe. Another, far more significant, if controversial, issue is that M&A is less available as a blunt but powerful corporate tool for growth.

M&A is by its very nature a bullish business. Every deal is a triumph of hope over fear. Each December, Steven Goldstein, CEO of Alacra, a media aggregator based in New York, gathers projections for M&A and posts them on his blog. A year ago he summarized ten reports from around the world: Eight were positive, a few giddily so. PricewaterhouseCoopers declared that “fundamentals are strong for U.S. mergers & acquisitions activity in 2013.” A survey by Mergermarket found that “numbers should rebound behind the strength of strategic buyers, the emerging markets, and energy sector.” RBS Citizens saw a “perfect storm” of factors driving M&A activity in the U.S. middle market. Web portal PEdaily.cn predicted China would drive outbound M&A. Ernst & Young forecast a big year in India. And Jordan, Edmiston Group, an independent, New York–based investment bank, called this “one of the fertile times to be in media mergers and acquisitions.”

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