High stock valuations and interest rate uncertainty are making companies cautious about pursuing mergers and acquisition deals. Fred Katayama reports.
Global M&A deals drop
Bayer’s blockbuster $66 billion takeover deal for Monsanto grabbed headlines, but global M&A actually slumped in the third quarter. Thomson Reuters preliminary data show the value of announced mergers and acquisition deals like that between Danone and WhiteWave Foods fell 27 percent from last year. Making companies gun-shy: high equity valuations that raise the fear of overpaying as stocks race toward record highs … and uncertainty over the Federal Reserve’s interest rate policy.
UBS Americas M&A co-head Marc-Anthony Hourihan said, “It gets down to high prices. I think most of last year and the two years prior, even if it was priced high, it was OK. Now, it had better be for a good growth profile.”
Going against the high valuation grain: drug makers. They keep paying high premiums to buy new products. Pfizer will pay an 118 percent premium to buy cancer drug maker Medivation.