Are there signs that mergers and acquisitions activity might rise over the coming months?
Alexis de Rosnay
There have been tentative signs that the mergers and acquisitions (M&A) market has picked up over the last few weeks. The key ingredients for a sustained pick up in M&A is the performance of the equity markets in general – it is no coincidence that the bumper years for transactions have taken place in strong equity markets. Recent events such as QE3, the European debt crisis being tackled, and a historically low interest rate environment have bolstered global equity markets and should help in a slow but prolonged rally over the medium term. The mega mergers, such as between BAE and EADS, are less impacted by equity market sentiment, as large international companies can finance acquisitions through debt financing. The key will be M&A activity among medium-sized and smaller companies, which is where we anticipate seeing activity levels increase over the coming months.
Alexis de Rosnay is chief executive of Canaccord Genuity.
Deal-makers continue to contend with the lingering effects of the global financial crisis and a dynamic economic environment. Worldwide merger and acquisition activity has fallen to a three-year low and third quarter deal-making in Europe hovers at the lowest point in nearly a decade. However, many of the ingredients for robust deal-making are in place: corporations are flush with cash, interest rates are at all-time lows and shareholders are demanding growth. Only confidence is missing. Chief executives and boards have held back on ambitious deals for quite some time and there are no indications this will change soon. Meanwhile, companies are focusing on cleaning up balance sheets, divesting assets and preparing potential deals for when the time is right. Clarity in the Eurozone, the US election and improved global economic growth may be the catalysts needed for a new era of deal-making. It’s long overdue.
Matt Toole is global director of deals intelligence at Thomson Reuters.