Are Mega Deals Paving the Way for the Middle Market?

August 8, 2013 12:35 by Clayton Reeves in Capital Markets, M&A  //  Tags: , , ,   //   Comments (0)

Last week we wrote an article about a slew of deals announced in a 24 hour period.  We wondered if this may be a good sign for the rest of the market as a whole, in terms of increased deal volume in the future.  The Washington Post agrees with this sentiment, saying that the increase in mega mergers is a reflection of growing confidence in the economy.  As we said, the number of deals is down YoY compared to 2012, but the dollar amounts have increased.  Deals in dollar terms for 2013 have grown to $607 billion, compared to $486 billion during the same period in 2012. 

This seemingly good news conflicts with some negative news around corporate margin widening slowing down, which would seemingly indicate at least a lull in growth for the future.  Of course, cheap corporate loans and the availability of dry powder for many companies and private equity firms means there are still plenty of willing buyers to be had, no matter what corporate margins are doing.

In the end, deals create more deals.  The larger market players seem to be realizing that all this cash sitting around isn't earning them much of a return, and are acting towards putting it to good use.  The middle market might be the next area that we see deal volume pick up in.

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