I have been trying to understand Bernanke’s seemingly willful effort to talk up long-term rates with his tapering speech this summer? Was he dead set of repeating Japan’s mistakes? Losing his will? Burnishing his legacy?
Maybe it was a genius bit of mental jujitsu. The wave of mergers announced this Labor Day weekend might just be that harbinger for the M&A wave that I (and most others) have looked for since 2010. Corporate cash levels are at record highs, rates are at record lows, and organic growth was anemic? So why aren’t/weren’t people out there doing deals?
Corporations are people too. Corporate leaders are just as emotional, procrastinating, inertial, and lemming-like as ordinary folks. So everyone talked about doing deals, but there was no prod to go out and actually do them. You could always find a seemingly good reason to hold off. Last minute Christmas gift-shoppers (I among them) are the classic example.
Bernanke injected urgency into the M&A equation. A deadline spurs action, as anyone who’s watched two drunk nitwits at a charity auction can attest (or sober nitwits in a $600m bid for satellite spectrum but that is a tale for another day…). This was particularly clear with Verizon/Vodafone, where the closing debt finance window was explicitly cited as a driver. I am sure the M&A bankers are beating that drum hard in every meeting.
Then the lemmings start shuffling and snuffling… Executives are also herd animals like the rest of us. At some point, the M&A wave will become self-sustaining as deal announcements drive the urge to keep up with the Jones’s. It is too early to know if these recent deals get that pulse rolling along. But an improving economy, embarrassing cash hoards, and the lack of further cost-cutting opportunities leave a lot of companies in need of a way to jazz up (or obfuscate) YoY numbers in 2014.
PS: I have no idea if lemmings actually snuffle. I’d like to think they do…
