Earlier this year, we marveled at the pace of mergers and acquisitions in 2015. Essentially, companies were joining forces or being bought at a record pace. Because of how many transactions had occurred, we wondered whether the pace would continue; especially considering the specter of interest rates rising.
In the Fed’s September meeting, it was decided that interest rates would be held (at least until the next meeting). As such, corporate mergers and acquisitions have continued at a torrid pace.
But is it just that interest rates are low enough to encourage these types of investments? A recent LA Times.com report suggests that other factors are at work. For instance, the health of the stock market has played an important role in the uptick in mergers. With corporate stock prices higher than normal, companies have the option of selling stocks to generate the funds necessary to finance these deals.
Additionally, some mergers are spurred by changes in the law, particularly the Affordable Health Care Act. As more corporations are subject to the Act, companies in the healthcare industry see opportunities to reposition themselves and make themselves more attractive as providers.
Ultimately, a deal has to make financial sense. Which is why many mergers are geared towards expanding a company’s footprint so that sales and profits could be increased. To achieve these goals, the counsel and guidance of an experienced attorney is essential. A skilled M&A lawyer can help executives understand the risks and challenges with the execution of a transaction, so that informed decisions can be made.
In the meantime, all indications point to continued growth in mergers and acquisitions.