Cash takeovers of U.S. public companies hit an all-time high the last six months, helped in part by a major proposed acquisition involving one of Connecticut’s largest insurers.
Cash takeovers of U.S. public companies hit $457.8 billion from May through October, smashing the previous six-month record of $406.5 billion set from February 2007 through July 2007, right before the credit crisis broke out. That’s based on statistics compiled by TrimTabs Investment Research.
“The merger boom is being fueled by a combination of extraordinarily easy credit and stagnant revenue,” said David Santschi, TrimTabs CEO. “It’s a lot easier to buy growth with cash or borrowed money than it is to grow a company organically, particularly when the economy isn’t expanding much.”
In a research note, TrimTabs explained that cash takeovers hit $97.5 billion in October, the highest monthly volume on record. Cash mergers topped $50 billion in five of the past six months.
TrimTabs said the new record is a cautionary sign for U.S. equities. “Merger activity tends to swell around market tops as confident corporate leaders turn to deal-making to boost earnings and revenue late in the economic cycle,” said Santschi.
Twelve deals used at least $10 billion in cash in the past six months, including four in the Information Technology sector. The largest of these 12 deals were Dell’s agreement to buy EMC using $46.2 billion in cash, Anthem’s $45 billion bid for Bloomfield insurer Cigna, Berkshire Hathaway’s $32.4 billion offer for Precision Castparts, and Charter Communications’ $28.3 billion bid for Time Warner.