M&A Hangover

Beware the Market Bust

cheap money 50 euro bill reuters
The ultimate trigger for mergers: Cheap money.
  • Why it matters

    Why it matters

    The value of takeovers this year could surpass the record year 2007, possibly signaling a decline in market values.

  • Facts


    • In May alone, companies agreed to M&A transactions worth $243 billion, the largest monthly value ever reached.
    • The fundamental fuel for the fusion fever are the trillions in cheap money printed by central banks of the West, the writer says.
    • Companies aren’t spending much of their mountains of cash on investments because few believe the current economic upsurge has long-term sustainability, he argues.
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This time everything will be different! As so often in an era of rising stock prices, flourishing business in the capital markets and a boom in mergers and acquisitions, the augurs of the financial markets are ready to give good arguments on why everything can only move in one direction: Upward.

A market in which the ascent is currently especially steep is the business of mergers and acquisitions, or M&A in short. In May alone, according to figures from data provider Dealogic, companies agreed to transactions worth a breathtaking $243 billion, or €217 billion – the largest monthly value ever reached.

In the first five months of the year, the figure was $1.85 trillion. The entire year could very well end up surpassing the peak value achieved in 2007.

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