Posts Tagged ‘Mergers and Acquisitions’

Corporate M&A Activity Signals Poor Outlook

Monday, August 30th, 2010

Corporate mergers and acquisitions are heating up, with French pharmaceutical giant Sanofi-Aventis, U.S. technology companies Hewlett-Packard and Intel and others preparing to purchase other companies. No doubt strategic acquisitions are a better use of cash than letting it idle on the balance sheet. But this activity represents a vote of no-confidence in our economic future. When such corporate leaders could not think of a more imaginative way to invest in their futures (more research and development to seed future innovation perhaps?) than the pursuit of operational efficiency, this does not bode well. Of course, the profits to be generated will result from cost savings as the acquired company is integrated into its new corporate owner. This suggests more corporate downsizing and rising unemployment. It is hardly likely to persuade small business owners that we should take on debt and hire when the Fortune-500 appear to share our lack of confidence in our economic future. The Administration does not appear to have taken note of the implications of this spate of merger activity as it is pushing for a major piece of legislation for spur small business lending. Even with the capital available, who would borrow?