Big deals aren’t going anywhere for a while.
Janet Yellen just gave M&A the green light for summer. Low rates grease the wheels for dealmakers and give them an easier debt market.
Healthcare and technology deals have been part of a growing M&A scene that will lift banks’ future earnings reports. M&A is not just up in the US, but internationally as well.
When M&A roared past the $US4 trillion mark in 2007, it happened largely on the spending of private equity firms. This time around, private equity is out of the equation. Instead, activist investors and big corporations are what’s driving the deal scene.
A Deutsche Bank report out this morning has three big charts that highlight the real reasons why M&A is here to stay.
For one, corporate balance sheets are absolutely packed with cash. The country’s biggest companies have more cash than they know what to do with and instead of giving it back to activist investors, they are spending it on mega-mergers.
At the same time, activist investors have more cash for M&A than ever before. Part of this is thanks to regulations that allow hedge funds virtually unlimited leverage. Hedge funds may only have one-tenth the cash corporations do, but they can wield disproportionate influence at proxy season.
The last reason M&A is on the rise? Activists are also more successful than ever. Armed with more cash than ever before and working more aggressively than ever before to get deals done, activists are as much a part of the robust deal environment as the Fed or the bankers.