Dealmaking hits highest levels since 2007
Should we view all these corporate weddings as irrational exuberance that comes before a swoon for stocks?
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. (ORCL) planning 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).
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