Mergers and acqusitions near 2000 levels
Worldwide mergers and acquisitions this year have reached $2.3 trillion in value, the most since the banner year of M & A exuberance, 2000. That bubble year had $3.3 trillion in deals.
A recent Wall Street Journal article ("Big Mergers Are Making A Comeback as Companies, Investors Seek Growth", 11/5/2005) notes this milestone, and looks at the current set of mergers with much of the same view that this site has been pushing. Among its conclusions:
- Investors are getting more comfortable with acquisitions. "In the 10 largest U.S. deals announced this year, half the acquirers saw their stocks rise during the first week after an announcement." That's in sharp contrast to two and three years ago, when most big acquisitions sent stock prices down.
- Companies are loaded with cash, having "a corporate cash stash that now represents 10% of all corporate assets."
- Europe is getting much more open to cross-border acquisitions. "The biggest companies across Europe have built up giant reserves of cash because of 'startlingly better corporate profits than expected since 2002,' says Bob McKee, chief economist at Independent Strategy Ltd., a London-based investment consulting firm."
- Cost cutting is the prime announced reason for most acquisitions. "In justifying mergers, companies are reluctant to mention possible 'revenue synergies' -- the idea that two disparate income streams can boost each other. That was a key rationalization for Time Warner Inc.'s troubled purchase of America Online Inc. in 2000 -- the notion, for instance, that AOL's online service would help Warner Brothers sell movie tickets."
One warning sign: companies now paying increasingly higher prices for assets. Part of that can be attributed to the competition with cash-rich equity firms. The world has a record amount of cash looking for a profitable home.
3:34:39 PM 
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