M&A Activity Is Heating Up Once Again; Is This The Beginning Of Another Buyout Boom?

Friday, February 15, 2013 07:59
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M&A Activity Is Heating Up Once Again; Is This The Beginning Of Another Buyout Boom?

Tags: business owners | marketing | mergers

Consumer confidence is what drives retail sales; business confidence is what drives mergers and acquisitions.
 
The acquisition of H. J. Heinz and the merger of American Airlines and US Airways are the latest evidence that the multi-billion mergers that typically accompany strong market rallies.

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The return of such M&A activity has been sudden, occurring just over the first few weeks of 2013.
 
The two recent announcements come on the heels of the $24 billion buyout of Dell Computer, taking that company private.
 
That deal, in turn, followed the buyout by John Malone of Britain’s Virgin Media.
 
Even so, bankers are reluctant to dub this activity as a return to the M&A glory days of the late ‘80s, the dot-com boom of the late ‘90s, and the LBO frenzy of ‘07.
 
Supporting the M&A boomlet is the S&P 500 index’s brief rise to its highest point since November 2007 and the clearing away of some uncertainties tied to the fiscal cliff that were hanging over the markets.
 
Corporations also have a ton of cash from hunkering down after the crisis, laying off employees and cutting spending. S&P companies collectively have stashed about $1 trillion.
 
Returns on cash deposits are so low in today’s interest rate environment, executives are looking to deploy it elsewhere.
 
Private equity is also reigniting with hundreds of billions in dry powder—cash set aside for dealmaking.
 
All of this is a signal that banks are lending once again, which is also another sign of economic recovery in earnest.
 

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