M&A - They're Going To Keep Dancing Until After The Music Stops

M&A activity is hot, hot, hot. Don't expect it to cool off before any correction. They are going to keep dancing right through the decline. Pipelines are full and you can't stop things once they get put in motion.

Many mistakes and bad deals will be done before and after the top.

They just can't help themselves.

When you're paid to dance, what do you think is going to happen. They're going to dance. And they going to keep dancing even when the music stops.

That is just the way the game is played.

The investment bankers are the last guys to call the top. Their job is to feast at the trough as long as they can. 'tis the nature of the beast.

The M&A Dilemma

For an acquirer the time to buy is when prices are cheap. Like after the tech bubble bust, or post the recent financial crisis. Unfortunately, no one wants to sell then.

And so, the dilemma for an acquirer (one of many actually, including the problem of buying a lemon due to asymmetric information) is that they generally can only get a deal done once the target has appreciated in value (and consequently ain't worth buying).

Acquirers purchase anyways, mainly because they are personally incentivized to do so (ego, personal gain, etc.) and it is hard to sit with underutilized assets (whether cash or unused credit).