Predictions Panel 2014
By Pierce Crosby
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Look for more mergers and acquisitions and companies to weather rising interest rates, but don’t expect Washington to do much of anything in 2014. These are some of the views that emerged from the Breakingviews Predictions panel at Thomson Reuters on Tuesday. Joined by M&A adviser Paul Taubman, Blackstone President Tony James, and Former Fed Governor Kevin Warsh, Breakingviews Global Editor Rob Cox moderated a fast-paced and wide-ranging discussion on markets, economies and corporate finance for the year to come.
Though the Fed’s plan to taper its bond buying is likely to lead to a higher cost of capital for companies in the United States, James said he is confident that most corporations have strong balance sheets and have extended the maturity of their borrowings in ways that not even the federal government has done. Warsh said it is right for the Fed’s accommodative monetary policy to come to an end or risk a wide misallocation of capital throughout the economy.
Rising rates may, however, lead to an increase in deal activity, said Taubman. Companies will find that M&A leads to higher returns. The subdued volume in recent years, said Taubman — who advised Verizon on its purchase of the remainder of its wireless business from Vodafone — are in part a reflection of risk aversion that took hold during the financial crisis of 2008. Activists, too, have played a role in keeping companies from investing surplus capital and instead returned it to shareholders.