Tuesday, August 31, 2010

What is Driving M&A These Days?

There's an awful lot of merger-and-acquisition activity underway in the US these days. If you wanted to 'play' it in a relatively accessible way you could doso through a merger and arb oriented ETF, such as John Spence discusses in his "Fund Track" in today's Wall Street Journal.

(I'm not suggesting you do any such thing, by the way. The observation was purely hypothetical. My readers are clearly too smart to take market advice from blogs.)

Anyway: what is driving it? Are these directors, eager to build empires? CNBC says not, that it is shareholder driven.

It may simply be that there is too much cash out there. Nobody wants to sit on cash. One wants to put it to work. But over the last couple of years, the idea of putting cash to work has been scary. Buying another firm, one that has a track record or perhaps one with assets that create some synergy with one's own, may be one of the least scary ways to do so.

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