31 Jul M&A Begins to Roar

Lately it’s been reported that mega-mergers are coming back in a variety of industries. We have waited quite awhile for this to happen. We hope that will also begin to trickle down to the middle and lower middle market of deals.

There are pluses and minuses for the economy when M&A gets hot and heavy. Of course it means lots of jobs for financial services folks who work on the deals, lawyers, investment banks, accounting firms, consulting firms. It means large companies hopefully find ways to be ever more profitable through synergistic acquisitions. This is generally good for the stock market. And when companies are sold for premiums above their trading prices, that is also good for investors.

When deals are highly leveraged, however, the risk is that a somewhat slight downturn can spell disaster when debt service costs are high. Also mergers often result in large layoffs of overlapping personnel. It seems as if today’s deals are not quite as dependent on debt as in the roaring 2000s. Let’s hope some lessons were learned.

But in all M&A more good than bad. It means our financial system is indeed gaining strength from its near collapse in 2008.