Why Has There Been so Much M&A Activity Recently?

There has been a rebound and you might be wondering, in the middle of a pandemic, how could M&A volumes surge again? 

Well, surge, they have. There are several reasons.

First, according to Goldman Sachs analysts, global deal volumes fell 51% year-over-year in the first of of the year because when the economy is seemingly in a bottomless pit and it feels like the sky is falling, no price is worth paying for a company.

In July and August, deal volumes increased 7% and 8%, respectively.

One driver is low interest rates. The pandemic did indeed bring about lower rates needed to stimulate the economy. As confidence in the economic recovery picked up and the cost of borrowing against an acquisition fell drastically, M&A picked up. Stocks have risen fiercely against mounting concerns about a slowing economic recovery and Goldman does indeed see more M&A declines on the horizon.

Another driver of the activity has been companies trading at bargains. Many oil and industrial companies filed for bankruptcy, creating an attractive buying opportunity for larger companies with strong balance sheet, especially as those companies look to take market share in an uncertain environment.

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