Merger and Acquisition Deals Being Done, But More Modestly

Ezequiel Minaya and Tatyana Shumsky reported yesterday at The Wall Street Journal Online that, “Finance chiefs may be running out of time to revive a year of lagging merger and acquisition activity, but many are prepared to pounce off the sidelines if conditions pressuring dealmaking subside.

Buyers are more selective this year, preferring smaller transactions as a soaring stock market pumps up company prices.  The S&P 500 is up 12.03%  over the past year, and as company shares rises in value, premiums – the bump above share prices buyers offer to sellers — are being squeezed.

“There’s also some hesitancy to striking a deal prior to passage of a corporate tax overhaul and potential new trade policies.”

The Journal writers noted that, “Deals are still being done, but on the more modest end of the scale. While the number of U.S. deals is up 8% through Sept. 22 compared to the same period last year, values have slipped 15% to $922.1 billion, according to Dealogic.

“‘What is missing is transformative, bet-your-company M&A,’ said Daniel Wolf, a partner at law firm Kirkland & Ellis LLP. ‘And until you see a little more certainty in the overall market and political environment, it’s hard to see a sudden shift in favor of those types of transactions.’

“Only seven deals through Sept. 22 have breached the $10 billion threshold Dealogic tracks. That trails last year’s pace, in which there were 18 such deals, and 2015, which notched 35 transactions above the mark, according to Dealogic.”

Yesterday’s article added that, “Finance chiefs may be sitting on the sidelines, but they’re still paying attention. Glenn Landau, CFO of International Paper Co. said he spends about a third of his time scouting potential acquisition targets and weighing investment costs against projected returns.”

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