Marchildon,
Gregory Philip (1990) Promotion, Finance
and Mergers in Canadian Manufacturing Industry, 1885-1918. PhD Thesis, LSE-UK.
The existing research on the first merger waves in
the United States, Britain, and to a lesser extent in Germany, has produced
valuable information on the rise of the modern industrial enterprise. These
studies reveal important similarities as well as a few significant differences
in the nature of the economic development of these nations. A new merger series
for Canadian manufacturing industry was generated to provide a further
comparison. In addition, a large pool of information was gathered concerning
the workings of promotional syndicates, corporate flotation’s, and secondary
financial markets. This aggregate data, in conjunction with a case study of the
most prominent Canadian promoter of the era and the companies he consolidated,
is used to determine the relationship between security financing and the
evolution of manufacturing industry in Canada. An explanation of the cause of
the first Canadian merger wave, 1909-1912, is based on individual case evidence
and the results of causality tests using aggregate data. The necessary
pre-condition to a merger wave was the emergence of a broad market for Canadian
industrial securities. Although high stock prices stimulated merger waves in
Britain and the United States at the turn of the century, the first Canadian
merger wave had to wait another decade until the expansion of the Canadian
market and the tapping of the British market for Canadian
"industrials" permitted large-scale flotations. The potential profits
which were available through corporate reorganization, rationalization of
manufacturing and distribution networks, and monopolization, were reflected in
the higher rates of return which British investors sought en masse in the new
Canadian securities. This flood of British capital in turn accelerated the
industrial transformation taking place in Canada and encouraged further
mergers. High stock prices triggered the first merger movement as they had in
Britain and the United States. Corporate financiers became merger promoters as
they catapulted propositions into consolidations large enough to be listed on
public stock exchanges and to be of interest to prospective investors.
High-risk financial methods provided the incentive to financial intermediaries
to broaden this market as quickly as possible and, therefore, to deliver the
maximum amount of cash to the new industrial consolidations.
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