We think its not...yet. The current level of activity suggests that corporate managers will continue to buy rather than build.
In a recent CNBC poll, some 56% of companies said that they plan an acquisition in the coming year, up from 40% last October and the first time since 2010 that more than half plan to do something. But even if such plans were to generate a surge later this year, it would make a bullish argument for equities, not the bearish one accompanying much of this recent buzz.
M&A, quite simply, is a vote of confidence in market values and the future generally. Companies buy each other when they see a reason to expand and when other firms look attractively cheap. The same goes for private equity, which is no less in the acquisition business than corporations. If these decision makers saw stocks as expensive, they would pursue their expansion with direct investments in new equipment, premises, and in a hiring program. Since they are buying these days and doing relatively little building, they have effectively announced that stock values still make a purchase the more attractive way to expand.
Table 1. M&A Activity (monthly rates)
Period
|
Number of Deals
|
Value ($ in bil.)
|
2013 4Q
|
817
|
$79.6
|
2014 1Q
|
959
|
$108.7
|
2Q
|
1,000
|
154.8
|
3Q
|
1,003
|
108.1
|
October
|
1,123
|
96.5
|
November
|
1,006
|
194.0
|
December
|
983
|
103.6
|
2015 January
|
995
|
$78.4
|
February
|
938
|
114.3
|
Source: FactSet
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