$1.9T: The Total of 2015 M&A Deals and Current Corporate Cash

In its latest newsletter, Pitchbook reports that there M&A transactions totaled $1.9 trillion. (Subscription required for full report). Although there was a dip in activity in the fourth quarter, the year’s total was still 21% higher than the sum of deals in 2014.

Corporate Cash

Coincidentally, an equal amount of corporate cash is still sitting on the sidelines. In a New York Times column, Adam Davidson writes “Collectively, American businesses currently have $1.9 trillion in cash, just sitting around.” He goes on, “The notion that a corporation would hold on to so much of its profit seems economically absurd, especially now, when it is probably earning only about 2 percent interest by parking that money in United States Treasury bonds. These companies would be better off investing in anything — a product, a service, a corporate acquisition — that would make them more than 2 cents of profit on the dollar, a razor-thin margin by corporate standards. And yet they choose to keep the cash.”

Deploying Capital

We agree with Davidson that companies would be better off deploying idle capital on corporate growth strategies such as research and development, commercializing new products or strategic corporate acquisitions. But, perhaps the old “build or buy?” model has now become a question of “build, buy or hoard?”.

 

Written by: Doug McCullough, McCullough Sudan, PLLC, Partnerfree online slot

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