A buyout frenzy took over boardrooms from Tokyo to San Francisco, adding fuel to a record-breaking rally across major stock markets around the world in the past days.
With Charles Schwab Corp.'s $26 billion discount brokerage buyout of TD Ameritrade Holding Corp. leading the pack, more than $70 billion in deals have already been announced this week.
Luxury goods giant LVMH, Swiss drugmaker Novartis AG and Japanese conglomerate Mitsubishi Corp. are among a slew of companies that have also announced multibillion-dollar transactions.
The unexpected surge of development is seen as a vote of confidence in the future of markets when deflation worries ebb and the US and China move towards a trade deal.
The S&P 500 Index, Dow Jones Industrial Average and Nasdaq Composite Index all closed at record highs on Monday, and on Tuesday the MSCI World Index of developed-market stocks traded at an all-time high as well.
Low-cost funding is the common denominator in all these deals, with motives ranging from consolidation of the industry to diversification into new markets.
Worldwide, policymakers have been cutting interest rates in a bid to boost economic growth, and even forcing the Federal Reserve and the European Central Bank to expand their balance sheets.
According to Rhett Kessler, senior fund manager at Sydney-based Pengana Capital Group Ltd., which oversees about A$3 billion ($2 billion) in assets, it is surprising that, given the low borrowing costs, there has yet to be a much bigger influx of merger and acquisition activity.
There are reasons to be cautious for all the optimism spurred by the flurry of deal-making. Typically, mergers and acquisitions tend to peak along with the business cycle, meaning that some market participants will read this as a late-cycle signal.
Meanwhile deals such as TD Ameri,trade's purchase by Schwab are symptoms of changes in the structural industry rather than the economy's health.
The exuberance of investors beyond the US business framework seems to be more measured. While the Stoxx Europe 600 has been at its highest since May 2015 and the Topix Index in Japan reached the strongest level this year on Tuesday, both lag behind the S&P 500's expected performance in 2019.
Meanwhile, according to data compiled by Bloomberg, there were at least 10 deal announcements worth $1 billion or more as of Monday. Here are three of the biggest:
- Charles Schwab, the brokerage based in San Francisco, announced that he would acquire TD Ameritrade in the midst of a collapse in the cost of investing as suppliers are paying $0 fees.
- Kirkland Lake Gold Ltd. of Canada reached an all-share deal of almost C$5 billion ($3.9 billion) to buy Detour Gold Corp.
- EBay Inc. is selling its StubHub ticket market for $4.05 billion in cash to European rival Viagogo.
