In the downtowns of the major cities large law firms and investment banks are to found. One division is devoted to mergers and acquisitions (M&A) and they are the sexy side of investment banking. The idea of every company is it grows, at some point the adds on or additional market share the senior executives will consider is what we do core business or what business are we in. The strategic plan will address this issue and after the Board passes it, the company will act on it. The senior executives often will have a list of companies they admire and move to bring them into the companies orbit to use the talents and diversification. Then they will consider selling a piece. All of this is normal activity for companies.

In an article by Anirban Sen and Anousha Sakoui of Reuters, global M&A activity grew at a sluggish pace in the 2nd quarter, but dealmakers are forecasting transactions will pick up in the 2nd half of 2024. Higher interest rates (cost of pay back the loans), a hostile regulatory environment (the regulators say no) and a high stock market makes the cost higher.

Globally the deals signed in the 2nd quarter was 7,949 down 21% according to Dealogic. The dollar value grew to $769.1 billion.

Damien Zoubek, co-head of US corporate M&A at Freshfields Brukhaus Deringer believes it is turning out to be a good year and we will keep cruising along.

In 2018 and 19, the deal volumes averaged $4 trillion a year.

Private equity firms led $286 billion deals in the first half.

The US M&A volumes were $324.4 billion down 3%, Europe is up 27% and Asia-Pacific is down 18%.

To finance the activity, more companies are turning to private credit than the traditional bank loans. Don Mendelow, co-head of Evercore noted Banks are partnering with private equity or raising their own funds so they can have the same product capability.

The biggest deals were ConocoPhillips’ $22.5 billion takeover of Marathon Oil; Silver Lake’s $13 billion taking private Endeavor Group Holdings and J&J $13 billion acquisition of Shockwave Medical.

Linking to dividend paying stocks, companies that have cash or access to capital can do mergers and acquisitions, it does not mean they have to but they can. If you invest in dividend paying stocks, likely they will be doing a merger and selling low growth sections of the company. It is one of many reasons why they are able to continually make profits to pay dividends.

There are more questions than answers, till the next time – to raising questions.