Skip to main content

Deals galore!

The Financial Times ran a special report section on corporate finance today that included a very relevant article by Gillian Tett.

In, "Deals galore in a world awash in cheap money", Tett examines the relationship between easy money and an increased number of corporate buyout deals.

Private equity firms have led the latest buyout craze, thanks to increased investor participation in their funds and new ways to finance deals. As the author points out, the number of deals have increased, along with the bid prices.

One reason why private equity firms have been able to make these audaciously large bids in recent years is that investors are clamouring to put money in their funds.

However, another equally important factor is that the debt capital markets have been extremely accommodating. This partly reflects the fact that the global financial system has been awash with cash, after several years in which central bankers have kept interest rates low.

However, it also reflects a bigger structual change now afoot. For although companies used to have a very limited range of choices about how they raised finance, these days the options are getting wider, as investment banks become more adept at providing innovative issuance tools.

At the same time, the attitude of investors is changing. Whereas banks used to purchase the bulk of loans in Europe, hedge funds are now jumping eagerly into this sphere, together with specialist structured portfolio managers who run vehicles known as collateralised loan obligations (CLOs).

This has created a vast pool of investors wanting to purchase leveraged – or risky – loans, and has meant that the funding that can be placed in the market is consequently far greater in scale.

“There is a massive shift of assets under way from European banks to hedge funds and asset managers,” says Michael McLaughlin, head of global structured products at Bank of America.


I think this story really goes along with the trends described in the recent Economist article on debt. The game is changing and the creation of credit and what we call "money" becomes increasingly complex, a point I believe Doug Noland has made in the past.

We've asked before how new money and credit creation was affecting merger and buyout activity; I think we're starting to see some of the answers.

Popular posts from this blog

Nasdaq credit rating junked.

S&P cut Nasdaq's credit rating to junk status citing debt burdens and its questionable strategy to buy a controlling interest in the London Stock Exchange. Financial Times reported that the exchange's counterparty credit & bank loan rating were lowered fromm BBB- (lowest investment grade rating) to BB+. The change will increase Nasdaq's borrowing costs should it wish to pursue aquisition targets. For an earlier look at the exchange consolidation trend that brought about Nasdaq's push for a stake in the LSE, please see "Exchange fever" .

Jesse Livermore: How to Trade in Stocks (1940 Ed. E-book)

If you've been around markets for any length of time, you've probably heard of 20th century supertrader, Jesse Livermore . Today we're highlighting his rare 1940 work, How to Trade in Stocks (ebook, pdf). But first, a brief overview of Livermore's life and trading career (bio from Jesse Livermore's Wikipedia entry). "During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly. Ironically, Livermore sometimes did not follow his rules strictly. He claimed that lack of adherence to his own rules was the main reason for his losses after making his 1907 and...

Finance Trends 2019 Mid-Year Markets Review

Email subscribers of the Finance Trends Newsletter receive the first look at new articles and market updates, such as the following piece, sent out to our email list on Sunday (6/14).   Hello and welcome, everyone! If you received our last email notice over the July 4th holiday, you'll know that this weekend's newsletter will serve as a mid-year market update and a follow-up to issue #29, " How to Reinvest in a Rising Market ".   Ladies and gentlemen, without further ado, let's start the show...  Finance Trends Newsletter: Our Mid-Year Market Review When we last spoke, back in February, the U.S. stock market was rallying off its December-January lows. As the S&P 500 and Nasdaq reclaimed their 200 day moving averages in February and March, it became increasingly apparent that a lot of retail investors (and perhaps some institutional investors) were left under-invested while watching this recovery move from the sidelines.  The U.S. stock ...