Mergers and acquisitions in the U.S., proceeding at the slowest pace in three years, may pick up after the presidential election in November, JPMorgan Chase & Co. Vice Chairman James B. “Jimmy” Lee said.
“A lot of people are hoping that after the election, regardless of who wins, that a big cloud of uncertainty is going to be taken away,” Lee said at the annual Bloomberg Markets 50 Summit today in New York. “Next year could be the year” for a resurgence in transactions, he said.
Companies have amassed cash on their balance sheets and are reluctant to make acquisitions ahead of the election and amid the possibility of spending cuts and tax increases in January, Lee said. Dealmaking in the U.S. this year is on track to be the lowest since 2009, according to data compiled by Bloomberg. To date, $506 billion in deals have been announced, about 24 percent less than in the same period in 2011, the data show.
“Big public-company CEOs want to eliminate, to the extent possible, uncertainty,” Lee said. “They definitely have the firepower. They just really haven’t had the willpower yet.”
A recovery is “around the corner,” Lee said, since it’s been about four years since the beginning of the financial crisis. In 2009, M&A volume totaled $655 billion, data compiled by Bloomberg show.
A growing share of merger activity involves combinations that cross national borders, said Antonio Weiss, the New York-based head of investment banking at Lazard Ltd., at a separate panel discussion. He added that the percentage of such deals this year is the greatest in half a decade. The U.S.’s share of the merger market is shrinking and Asia’s is growing, he said.
“When the next wave comes, it’s going to be about globalization,” Weiss said. “And waves are not subtle -- we’ll all know that it’s started.”
Peter Weinberg, the co-founder of Perella Weinberg Partners LP, the New York-based investment bank, said companies may never again announce as many deals as they did in the record year of 2007, when cheap credit fueled a leveraged-buyout boom.
“The $4 trillion years will never return,” Weinberg said.
“The caution that executives and boards are exhibiting right now is very prudent,” Weinberg added. “People are responsibly prudent, in some ways. That may mean the M&A business is not great for a while, but that’s our problem, not the boards’ problem.”
(Corrects content of Weiss’s comment in seventh paragraph of story that ran yesterday.)