? Other deals aren’t even on the radar: no adviser began 2022 expecting billionaire Elon Musk to buy Twitter, let alone for a lofty $44 billion.about just how assured chief executives are feeling about the economy, their businesses and other factors. Corporate bosses are more likely to initiate deals when they’re feeling bullish. The correlation is only modest, however: confidence among U.S. CEOs surged in 2010 without a resulting M&A boom.
One common way to get around this problem is to look at the value of announced deals as a percentage of total worldwide market capitalisation. On average since 2001, it has been about 9%, according to Breakingviews calculations based on the average annual dollar value of the MSCI All Country World Index and Refinitiv M&A data. The theory is that a low read one year indicates latent dealmaking potential and therefore a reversion to the mean and an imminent rebound.
Another problem is that it’s hard to run any business without a firm grip on future sales. Hiring and firing on Wall Street and in London’s Square Mile tends to come in waves, and typically lags the deal cycle. At the start of an M&A boom, banks often find themselves overworked and short-staffed. One adviser conceded that his employer turned down prospective clients during the 2021 deal surge because there weren’t enough people to work on them.
, whose top line heavily depends on deal fees. Yet that just goes to undermine all the breezy talk of how much business is flowing through the plumbing. Perhaps the pipeline is indeed full, but sometimes just with hot air.
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