Last year turned out to be the second-best for global mergers and acquisitions (M&A) since 2007. The total volume of M&A for 2016 was $3.6trn, a 17% drop from 2015's record $4.37trn.
The US accounts for around half of dealmaking, and there the outlook is auspicious. President-elect Donald Trump is hoping to encourage US firms to bring back some of the money they have stockpiled overseas to avoid taxes. If his tweak to the tax code works, much of the money seems likely to be spent on acquisitions. And "apart from available funds, the other big driver of M&A is CEO confidence", says Brooke Sutherland on Bloomberg.com. The Trump-induced rally thus bodes well.
Still, valuations are getting pricier, and the prospect of rising US interest rates may temper enthusiasm given how much of the M&A boom has been based on rock-bottom borrowing costs, making it cheap to borrow to snap up rivals. The broader problem is that the equity rally could rapidly reverse if Trump opts for protectionism or if the euro crisis returns. The M&A party "isn't over", reckons Sutherland, "but it's getting long in the tooth".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Zoopla: UK property supply hits eight-year high ahead of general electionNews More homeowners are putting their properties up for sale but many are relisting after failing to find a buyer last year - is now a good time to buy?
-
What’s happening to the NatWest share sell-off? Impact of general election 2024 explainedThe UK government has held shares in NatWest Group since the 2008 Financial Crisis. But a plan to sell off a large chunk of them appears to have been delayed.
