The bulls and bears on equity rallies and M&A

September 10, 2009

Rising stock markets and talk of improving economic confidence have prompted a barrage of analyst notes on how the M&A market is picking up.  Check out what I wrote on the subject earlier Thursday .

Here’s a few quick points from others:

Citigroup said that as global economic indicators stabilize, financing markets reopen and equity markets recover, hostile takeovers may be poised for a sharp resurgence. “Indeed, many recent high profile M&A transactions have been unsolicited or hostile in nature,” a note said.

My colleague Quentin Webb talked about mergers and aggravation, or hostile bids,  in July.

JP Morgan Asset Management thinks the return of private equity is still some way away, however:

“This being the early part of what is hopefully a new economic cycle, acquisitions are likely to continue to be businesses, rather (than) financiers using private equity firms. Also, the bids are likely to be paid for by share offers and cash that is coming from reserves and improved operating margins, rather than borrowings. Interest rates may be low, but there seems little appetite at present for large leveraged acquisitions,” strategist Tom Elliott wrote.

While the bulls seem to outnumber the bears, there are still some voices raising the prospect of a W shaped recession rather than the feel-good out-of-the-woods V brigade.

SocGen’s Albert Edwards writes:

“It’s almost as if the biggest credit bubble in history never occurred. Investors are increasingly convinced that a sustainable global recovery is emerging out of the wreckage. All praise to the central bankers (and Gordon Brown) for saving the world! I’m waiting till someone writes about the return of The Great Moderation and suggests Ben Bernanke is the new Maestro. Then I’ll know the lunatics have taken over the madhouse…..yet again.”

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