Clayton Dubilier & Rice LLC Chief Executive Officer Donald Gogel said dealmaking in the U.S. is being suppressed by hesitancy among corporate executives to put their money toward mergers and acquisitions.
The U.S. is in a “period of extreme caution on the part of most CEOs,” Gogel said today at the Bloomberg Dealmakers Summit in New York. “It’s a slower than usual dealmaking period, with private-equity dealmaking probably 50 percent below its peak.”
The so-called fiscal cliff of $607 billion in spending cuts and tax increases, set to start in January unless Congress intervenes, has provided a “cover” for executives to hold their cash until the uncertainty lifts, said Gogel. If Congress doesn’t act, taxes will go up and spending will be cut in January, probably leading to a recession, according to the Congressional Budget Office.
Global mergers and acquisitions slumped in the third quarter to a level not seen since the aftermath of the financial crisis, with companies announcing $466 billion of takeovers, according to data compiled by Bloomberg. Buyout firms had in aggregate more than $1 trillion of “dry powder,” or committed capital yet to be invested, at the end of 2011, according to research firm Preqin Ltd.
“There’s still activity, but it’s just not the same frenetic” drive to get deals done or to get them done this year, Gogel said of private-equity managers. “As a result, firms are having a little more trouble deploying some of that capital.”