Dealmaking hits highest levels since 2007

Should we view all these corporate weddings as irrational exuberance that comes before a swoon for stocks?

By MSN Money Partner Jun 23, 2014 3:21PM
Image: Handshake (© Image Source Black/Jupiterimages)By Victor Reklaitis, MarketWatch

If you've felt like every Monday lately has been a Merger Monday, that's because companies have been getting hitched at a rate not seen in years.

Though it still has a few days to go, the current quarter is already the biggest quarter for global deal-making since the 2002-2007 bull market that the financial crisis brought to a screeching halt.

This year's second quarter has seen $952 billion in announced deals, according to Dealogic figures out Friday, excluding spin-offs and repurchases. 

That's the most since $959.9 billion in deals in the 2007’s fourth quarter, when the Standard & Poor's 500 Index ($INX) hit a high that it wouldn't reclaim until 2013.

In 2014 to date, there has been $1.65 trillion in announced mergers and acquisitions worldwide, Dealogic says. That’s the highest dollar volume for a Jan. 1 through June 20 period since 2007, when it reached $2.26 trillion.

So should we view all these corporate weddings as irrational exuberance that comes before a swoon for stocks?

It's worth noting the number of deals is actually down from prior years, even though the dollar volume has jumped. The year to date has seen 17,140 announced deals worldwide, according to Dealogic.

That's well below the totals as of June 20 in other years. There had been more than 21,000 deals at this point in 2011 and 2012, for example.

In addition, the Financial Times has found encouraging signs in this year's M&A boom, saying it's the real deal since it’s not financed by as much borrowed money as in 2007.

But others are worried. In a column Friday, MarketWatch's Mark Hulbert quoted a Harvard Business School expert who said each of the last five great merger waves on record, going back more than 125 years, ended with a big drop for stocks.

Yet this expert, Matthew Rhodes-Kropf, also said a bear market isn't necessarily imminent, and his hunch is that this merger trend could last a while longer.

Monday was yet another busy merger day. Deals include Oracle Corp. (ORCLplanning to buy Micros Systems (MCRS) in a $5.3 billion deal, Wisconsin Energy (WEC) acquiring Integrys Energy Group (TEG) in a deal worth $5.71 billion, and Harbinger Group (HRG) bidding $10 a share for Central Garden & Pet (CENT).

In addition, General Electric (GE) has seen a barrier removed in its push to purchase Alstom, and Banco Santander (SANagreed to buy part of GE Capital's consumer-finance business for $952 million.

More from MarketWatch

Jun 23, 2014 4:25PM
No mystery here.  As governments continue to pander to a wealth envy public and push more regulations, greater consolidation is needed to leverage legal resources to lobby and fight back.

The losers = the 98% - they just keep on shooting themselves in the foot.

Jun 23, 2014 6:11PM
Big fish eating the small fish this is not a good sign for the economy in my opinion. Less competition and more inflation. The Fed better get with the program and start slowly raising now.
Jun 23, 2014 9:45PM
"MarketWatch's Mark Hulbert quoted a Harvard Business School expert who said each of the last five great merger waves on record, going back more than 125 years, ended with a big drop for stocks."

Well when Companies are using financial Engineering as opposed to Real Organic Growth, it rarely ends well. This time won't be any different.
Jun 23, 2014 6:17PM
All the money will end up at the top and then the Guberment will take over to create a Utopia where they are the caregiver to the entire world.  Scary thought but who will ever care or try to stop it?
Jun 23, 2014 6:39PM
Just more Wall Street quick buck schemes.
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