M&A May Be Crushed By New Economic Concerns

M&A is back and investment bankers across the world are counting on large deals to make them highly profitable again. The mergers business was hurt by the economic downturn, M&A deals that failed due to injured earnings, and an LBO boom in 2005 and 2006 that pushed many leveraged firms into distress in 2008 and 2009 Several huge transactions are pending now, lead by the BHP Billiton BHP offer to buy Potash POT for more than $39 billion. But that deal is just one of many deals in the pipeline. Reuters said that second half global M&A transactions reached $1 trillion, up 9% from the same period in 2009. Both the enthusiasm and investment banking activity around deals may be short-lived. Most of the reasons are similar to what they were in late 2007, 2008, and 2009. The capital markets have turned cautious again, and access to money may dry up quickly. A great deal has been made of the availability of inexpensive money for large companies, and the cash that many already have on their balance sheets. But big companies including McDonald’s MCD and Apple AAPL are using their strong balance sheets for share buybacks, high dividends, and in some cases nothing. To read the rest, head over to 247WallStreet.com