The biggest threat to the mergers and acquisitions craze sweeping across America is hubris.
That is according to Michael Carr, the global co-head of mergers and acquisitions at Goldman Sachs.
Carr sat down with CNBC Closing Bell’s Kelly Evans and Bill Griffeth to chat about the flurry of M&As that have flashed through health care and media industries since the start of 2015.
Carr said that the M&A boom had longer to run based on the ratio of deal volume to the broad market cap, but that there was a risk that buyers could get over-confident.
“As long as people don’t overpay dramatically or do stupid things, i.e. buy something that is two or three lanes over from their core business, they will keep the support of the shareholders,” Carr said.
“And one of the reasons that we think this is going to continue, shareholders seem to be very, very receptive. And until that changes, this should move along.”
Mergers and acquisitions volume hit $US3 trillion on Tuesday, according to Dealogic, and is on track to surpass the record of $US3.8 trillion in deals, set in 2007.
Goldman Sachs is leading the pack, having worked on $US988.7 billion worth in deals this year. The bank is trailed by Morgan Stanley and JPMorgan, which have worked on deals worth a combined $US776.2 billion and $US766.6 billion respectively.
Carr said the current financial atmosphere is very different from that of 2000 or 2007. Big time dealmaker Blair Effron of Centerview Partners previously sounded a note of caution of the level of deal activity, suggesting that the current market looked a lot like 2007.
Carr said: “I would say that it is a very coherent and cogent environment because companies are consolidating within their industry groups,” he said.
“It’s a much more sensible market than the last two peaks.”
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