Thursday, January 2, 2014

M&A Activity...Sign of a top?

This posting follows our earlier announcement of  "New Content for Soos Global Market Musings".  Please read the announcement which explains the intent and purpose of this new content style.   Postings will vary in size and depth of analysis, but collectively should provide interesting points over which to muse about markets!
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Markets Buoyant, MergerActivity Picks Up The U.S. accounted for 43% of all deals worldwide, the biggest since 2001. Are the animal spirits finally returning to the corporate world? The NYT reports.
Fyi….I’ve looked at M&A activity in the past, to see the relationship to equity markets.  It’s not uncommon to see big surges in deals as the equity markets rally, partly because the higher valuation on stocks allows them to be used as part of the deal, and partly due to optimism about the future.   Today, the low cost of funds also helps.   But often it’s a sign of a top, when the enthusiasm to buy companies is built on too much forward-looking euphoria.  I know that ‘this time is different’ (is it really?) because QE around the world has repressed interest rates and that companies have had a few years to become lean and mean, but it’s worth watching closely as the price of these deals become inflated and built on very high (too high?) expectations of futures earnings.

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