Stock markets looked optimistic on Monday, on news that there may finally be a global party for mergers and acquisitions (M&As). And this time, no one’s going to take the punchbowl away.
BHP Billiton’s bid for Potash, Intel’s for McAfee, HSBC’s for Nedbank and, closer home, Vedanta’s for Cairn—these are merely the big names dotting the stage in the past week. Global deals so far in 2010 are up 24% since 2009.
It’s unclear if this is the start of a new M&A cycle. But it’s curious that this frenzy comes at a time when markets have been pessimistic about a recovery—as has the US Federal Reserve.
Then again, the Fed, which has resolved to stay aggressive, may have a hand. Easy money happens to make it easy for firms to leverage themselves for deals, or to spend cash in such ventures instead of reducing debt. Like so much else that low interest rates mispriced, we have to wonder if the M&A market is now getting mispriced. Bubble, anyone?