A possible recent rise in mergers and acquisitions is being viewed as yet another sign that the economy is improving. Kraft's $17 million dollar bid for Cadbury, though rejected, has triggered speculation that other food companies such as Nestle, Hershey, and Mars may also bid on Cadbury.
August was the worst month for mergers and acquisitions since 2003, and would have been the worst since 1995 if not for Disney and Baker Hughes deals. But is this really a sign of an economic turnaround, or could it be that executives are only now finalizing deals that were postponed until they returned from vacations in the tropics? It's hard to say, but deals around the world, including the sale of Skype, have many people hoping that this will lead to more merger activity and help bring about an economic recovery.
1 comment:
I would agree that the M&A activity is due to an improving economy. A company has much better information than the public on the state of its business. And it is logical to assume that the bidding company knows:
1. The benefits that can be made from the merger.
2. The company it wants to buy can be bought at a reasonable price, partly due to the down turn. However, if this turns into a bidding war, the winner will probably overpay.
3. The bidding company knows it can secure the funding needed to make the purchase.
(3) is the most important sign that things are improving. Since it shows that banks are more willing to lend and undertake risk.
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