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The financial, economic and psychological forces behind the incipient M&A boom


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IMAGINE YOU are the boss of a public company. Normally you are busy making decisions, visiting outposts, talking to customers, suppliers and employees. The meetings are endless. You have little time for reflection. Then, suddenly this spring, after a bout of firefighting, the diary is bare. You sit in your study, hiding from the family, and ruminate—about what your firm lacks, about what it has too much of. You call a friendly investment banker and say: “I may need to do a deal soon.”


The results of such stay-at-home strategy sessions are now apparent. The past few weeks have seen a burst of M&A activity. There are merger deals of all kinds, in all parts of the world, across many industries—from tech and health care to banking and publishing. The dealmakers at investment banks are joyful. The last time things were this busy, they say, was in 2007-08.


Shareholders have some call to fear the worst. There is a weighty body of literature, some of it dating from the stockmarket bust of the early 2000s, that says mergers do not create value for the acquiring company. More recent research is more nuanced. Mergers overseen by serial acquirers tend to add to value, it finds. Once M&A gets going, things can quickly get out of hand, of course. But this early in the economic cycle, and in the unusual circumstances, mergers are more likely to have a coherent logic to them.


To understand the burgeoning M&A boom, go back to January and February. Bankers had a full pipeline of deals. Then the pandemic took hold. A dealmaking CEO had to think again. If you had a merger in the works, you pulled it. You couldn’t project numbers with confidence. You didn’t know if you could afford a deal, or finance it. Even then, the calls with bankers never stopped. In place of black-tie events came virtual schmoozing—from one home study to another.


The deal pipeline started to thaw in June or July. Announcements have been coming thick and fast since. A lot of this is down to market conditions, which quickly turned favourable and have remained so. Equity prices have roared back from their lows of late March. The companies with shares that rallied first—technology and health care—found themselves with a highly valued currency with which to pay for deals. The corporate-bond market has reopened with a vengeance, making debt finance available. Interest rates are at rock bottom and likely to stay there for a while. Private-equity firms have a lot of unused capital (“dry powder”) to call upon.


But financial conditions are not the only explanation. The economy is another. The pandemic has given companies new problems to solve and made some existing ones more pressing. M&A offers a fix. Debt-laden firms need to sell assets. Buyers want to plug some strategic holes. The rationale for a deal might be to secure supply chains, to diversify across geographies, to acquire a specific (often digital) capability; or simply to bolster revenues or cut costs when the outlook for profits is rather bleak. Some of the transactions that are happening now are deals of opportunity, says Alison Harding-Jones, head of M&A in Europe, the Middle East and Africa for Citigroup, a bank. And some are deals of necessity. Covid-19 has created winners and losers across industries, but also within them. CEOs of winning companies may find that the acquisition on their lockdown wishlist is available. Those of losing companies must simply try to sell wisely.

但金融状况并不是唯一的解释。还有一个因素是经济。疫情给公司带来了有待解决的新问题,也让一些原有问题变得更加紧迫。并购提供了一种解决办法。负债累累的公司需要出售资产。收购方希望弥补一些策略上的漏洞。并购的理据可能是稳住供应链,实现跨地域多元化,获得特定的(通常是数字方面的)能力;或者只是为了在利润前景相当黯淡时增加收入或者削减成本。花旗银行的欧洲、中东和非洲并购业务负责人艾莉森·哈丁-琼斯(Alison Harding-Jones)表示,目前正在发生的一些交易是投机型的。另一些则是必要的。疫情不仅在行业间,也在行业内部造就了赢家和输家。赢家的CEO们或许会发现,自己在居家隔离时列的愿望清单上的收购这一项有望实现了。而输家的CEO们只能想办法卖得好一点。

Both kinds will be wary of the response from shareholders. The risks of getting the price wrong or of underestimating the hassle of integrating acquisitions are ever-present. But deals that have a decent-looking strategic case are likely to be given the benefit of the doubt. Serial dealmakers will get the most leeway. Research from McKinsey, a consultancy, finds that companies that do lots of smallish acquisitions over time tend to add value to them. Such “programmatic acquirers” take more care in assessing targets, aligning M&A with broader corporate strategy and integrating their purchases.


As a rule big, one-off deals are riskier. The dangers seem small now but will grow the longer the M&A boom goes on. Bosses will start to worry that their dealmaking rivals look more in command of events. They will be prone to the ill-advised, grandiose merger. When the boom is all over, a few such souls will find themselves back in the study at home, but this time because they no longer have an office to go to, asking themselves: “Why did I do it?” ■