Dealmakers Back In Business Using Stock As Currency

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Bob Meyer

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Dealmakers Back In Business Using Stock As Currency

Following a multiyear downturn in the number of mergers and acquisitions, companies are again in the shopping mood. Already this year companies have announced $707 billion in mergers and acquisitions, according to Richard Peterson, senior researcher at Thomson Financial.

That’s 30% more deals than during the same period last year, and the highest since the M&A heyday in 2000. It’s the fourth-strongest pace of mergers and acquisitions in history. The biggest influence on M&A activity is the health of the stock market, largely because companies want to use their currency (stock) to buy other companies.

In the late 1980s under Drexel Burham and Michael Milken, some $400 billion of mergers were finalized annually, and a full 90% of them were concluded through the issuance of high interest Junk Bonds. Only 10% were done on a non-cash basis. Interestingly, 50% of today’s offers (“I’ll give you part of my company for your company”) are done on a non-cash basis.