The Fall and Rise of the Strategic Acquisition

Or why nobody is going to be buying any businesses in 2019. Here’s one pessimistic outlook for M&A in the coming year. Not a view I agree with, but a well argued one, nonetheless.

Remember when M&A professionals waxed poetic over horizontal and vertical mergers? The savviest bankers convinced CEOs and CFOs to expand upstream and downstream, take advantage of economies of scale, snuff out competitors. Now the life of the M&A banker is primarily comprised of brownnosing Private Equity fund managers.

And, apparently, PE firms are going to run out of steam as their liquidity is runs out when the current spree of cheap money ends.

That same interest rate rise is going to also impact acquisition finance and leveraged buyouts and credit terms will get tighter. So even conglomerate merger will weaken during the coming year, it is argued.

The situation in China doesn’t help. Political struggles with the US impacting on trade and cross border deals is but one of the problems, the others being internal to the Chinese market and high levels of local debt.

But what about corporates flush with cash from the Tax Cuts and Jobs Act in the US?