Merger-Mania Bites Back, Men’s Warehouse Crashes

Saturday, November 7, 2015
By Paul Martin

by Wolf Richter
November 6, 2015

The wild mania in global mergers & acquisitions has surpassed the $4-trillion mark for the first time ever in a year-to-date period. It’s higher even than the last year-to-date record of $3.93 trillion in bubble-year 2007, according to Dealogic. 56 deals hit or exceeded $10 billion, accounting for 37% of the total dollar volume, another record.

In the US, M&A has already blown the doors off all prior records. At $1.97 trillion year-to-date, volume is 43% higher than the prior year-to-date record of $1.38 trillion set in 2007. We know what happened after 2007.

Merger manias occur shortly before the stock market peaks. They occur because stocks are overvalued and debt is cheap which allows companies to use their overvalued currency and cheap debt to acquire other overvalued companies. They occur because CEOs think big is better. They occur because activist investors, hedge funds, and Wall Street are clamoring for them to get rich off them. They occur because acquisition accounting allows for all kinds of sleights of hand.

And they hardly ever work out.

Today’s example: Men’s Warehouse, which, after a six-month kerfuffle last year, finally managed to buy Jos. A. Bank in a $1.8 billion deal.

The Rest…HERE

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