By Robert Teitelman
First Bitcoin, now mergers. Market euphoria has rekindled hope that M&A is back, despite estimates for 2024 that barely top last year's $2.4 trillion and are half of 2021's $5.2 trillion. A Dec. 10 Financial Times headline summed up the mood: "'Merger Monday' buying spree signals deals revival since Trump election win." The spree amounted to $35 billion in four deals.
No matter that a handful of deals on one day isn't predictive of anything. M&A advisors, lawyers, consultants, and corporate executives are giddily bullish that the cycle has turned as rates fall and Trump targets regulation and taxes.
Is this good or bad for investors? Researchers have long sparred over that question. The study of long-term M&A performance traces back to work done by F.M. Scherer and David Ravenscraft in the 1980s. Subsequent studies differ on the numbers but share a broad consensus: Most deals fail to meet expectations. A recent book, The M&A Failure Trap by Baruch Lev and Feng Gu, analyzed 40,000 deals over 40 years and concluded that 70% to 75% fail, while acknowledging that "we are not alone in making this observation."
The debate continues -- consultant Bain insists companies have actually gotten better at M&A. But two big lessons stand out: Larger companies doing lots of smaller deals and transactions made during down cycles perform best. That doesn't sound like the era we are entering.
Last Week
Markets
South Korea impeached President Yoon Suk Yeol, French government bonds sold off after a downgrade, and Olaf Scholz's German government lost a confidence vote, election to follow. The Federal Reserve dropped rates by a quarter-point but signaled only two cuts in 2025; stocks and Bitcoin plunged. The House finally passed a spending bill to avert a government shutdown and sent it to the Senate on Friday night. On the week, the Dow Jones Industrial Average broke a 10-session losing streak but fell 2.3%. The S&P 500 was off 2%, the Nasdaq Composite, 1.8%.
Companies
Palantir Technologies, MicroStrategy, and Axon Enterprise joined the Nasdaq 100, replacing Illumina, Moderna, and Super Micro Computer. Three Vivendi spinoffs began trading: TV studio Canal+, ad company Havas, and publisher Louis Hachette. SoftBank's Masayoshi Son pledged to Trump to invest $100 billion in the U.S. on artificial intelligence. Trials of Novo Nordisk's newest weight-loss drug disappointed.
Deals
Treasury said the Committee on Foreign Investment in the U.S. didn't reach consensus on Nippon Steel's purchase of U.S. Steel. Talks continue...Danish brewer Carlsberg won U.K. and European Union approval to buy soft-drink maker Britvic for $4.2 billion... Nissan Motor and Honda Motor said they were exploring a merger. Bloomberg reported that Foxconn was talking to Renault to buy its Nissan stake, then put it on hold... UniCredit said it controlled some 28% of Commerzbank.
Next Week
Monday 12/23
The Conference Board releases its Consumer Confidence Index for December. Consensus estimate is for a 113 reading, 1.3 points more than November's figure, which was the highest since July of 2023.
The Census Bureau releases the durable goods report for November. New orders for manufactured durable goods are expected to decline 0.3% month over month to $285.7 billion. Excluding transportation, orders are seen rising 0.3%, after a 0.2% increase in October.
The Census Bureau reports residential sales data for November. Economists forecast a seasonally adjusted annual rate of 665,000 new single-family homes sold, about 9% more than in October. The median sales price was $437,300 in October, about 5% lower than the record of $460,300 in October of 2022. However, if the government shuts down, economic data from the Census Bureau and other government agencies may not be released.
Wednesday 12/25
Equity and fixed-income markets are closed in observance of Christmas Day. The Nasdaq and New York Stock Exchange have shortened trading hours on Christmas Eve, ending at 1 p.m. Eastern Time. The bond market also closes early that day, at 2 p.m. ET.
The Numbers
33
The number of major European corporate defaults so far in 2024, the second highest since 2008.
88
Number of listings exiting the London Stock Exchange this year, with 18 arriving, the largest outflow since 2009.
485 K
Estimated purchases of Nvidia's Hopper chips by Microsoft this year, over twice that of any of its AI rivals.
7.5%
Rise in 2023 healthcare spending, from 2022's 4.6%, as pandemic funding ended and private insurance grew.
Write to Robert Teitelman at bob.teitelman@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 20, 2024 19:03 ET (00:03 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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