KUHN CAPITAL Tuesday, October 17, 2017
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Financial Buyers Crunch M&A Numbers

Ernst & Young released today data demonstrating the rising role of financial buyers in domestic M&A transactions. Compared to last year, the proportion of transactions they captained in 202Q1 increased by nearly a third.

Financial buyers -- who generally acquire companies with an eye to raising returns by cutting overhead and reducing the cost of capital -- accounted for 11.3% of the deals announced in the first quarter, compared with 8.6% a year ago. The overall number of deals remained steady.

That is, the number of strategic deals, where dealmakers combine companies to realize operational synergies and growth, declined.

The E&Y report contends "... financial buyers appear to be the 'opportunists' of this transaction market."

We would note that in an economy characterized by reduced demand and tight bank credit, one would expect pension funds, with their low-cost, plentiful capital, to emerge as prominent M&A backers.


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