Deals slowdown creating anxiety

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I would love to write how business is booming, that there is clear sailing ahead for the economy, and that we attorneys will all have plenty of work to keep us happy for years to come.

Sorry, I can’t.

The picture is somewhat concerning.

BofA and Citi are both warning that the low number of year-to-date deals are raising concern for the markets during the upcoming slow season of May through October.

In a Yahoo finance piece  Savita Subramanian and her team at Bank of America Merrill Lynch are quoted saying,“An increasing number of charts in our work depict levels that are only prior to a bear market,” and, “Even if the Fed stays on hold, other markets are tightening.”

Subramanian also observed that year-to-date IPO’s are at their lowest level since 2009, with proceeds the lowest since 2003.

The article also quotes Tobias Levkovich and his team at Citigroup as saying the slowdown in merger & acquisition activity is “worrisome.” The article states, “M&A activity often has preceded equity market trends and the number of deals has fallen off meaningfully,”and “Higher financing costs, especially in the junk bond world, have put a damper on transactions not to mention government intervention on inversions and antitrust aspects. While financial conditions have improved over the last three months, tracking takeovers may become more important to the stock market.”

The “deals slowdown” has also coincided with an increase in corporate buybacks which is at the same levels as the 2007 peak.

All of this is of course cyclical, but the crystal ball the experts use is seemingly not as effective in determining the next cycle as it once was.

 

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