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There is probably not one single factor to explain the increase of mergers/acquisitions within European Union countries. In fact, there may be many causes. In this essay I will briefly discuss five of the principal factors that may have led to the increased merger activity in the European Union: a stable currency, an increasing market size, competition from large foreign enterprises, and the maturing of traditional European industries and technological change. An increase in cartels in Europe would seem to indicate a laxity of enforcement of anti-trust laws. I am not aware of a weakening of anti-trust laws thus I have very limited comments concerning cartels.
A stable currency is important for mergers and acquisitions because it encourages low interest rates. Low interest rates in and of themselves do not help mergers, but the inexpensive money that low interest rates engender allows for the large loans that are sometimes necessary to complete a merger or acquisition. Mergers and acquisitions often mean that one side is being at least partially bought out, so a large amount of money goes to some people. These people want the cash to remain valuable, and thus they too have an interest in a stable currency. If they thought that the currency might devalue, they might not agree to a merger/acquisition, preferring to keep an operating asset. The Euro has been very stable since its recent introduction, which has helped to fuel the flurry of merger/acquisition activity in Europe.
Another important point when considering mergers/acquisitions is the size of the market. A small market may offer no benefit to larger companies, as their resources and servi ...