It’s Corporate Acquisitions Time
More and more private and publicly held corporations are using their assets to acquire companies.
As the linked article indicates, corporate balance sheets are holding $1.5 trillion in assets (actually, I’ve previously seen $1.84 trillion cited, supposedly attributed to Federal Reserve estimates). What the article does not say is that corporations are holding more cash than at any time in almost half a century.
Why? It’s the result of several years of paring costs, squeezing out inefficiencies (and labor force), improving productivity and a fear-of-the-unknown driven paralysis. When businesses do not have confidence in the economy and there are many perceived unknowns, they are reluctant to re-invest their assets.
Meanwhile, institutional and many sophisticated individual shareholders are getting restive as they realize idle assets are not making them any money.
“Free it up and pay it out as dividends if you’re not going to use it! Make acquisitions! Just do something other than rat hole it away.”
Hmmm, let’s see…make acquisitions. Now there’s an idea we can get behind! In fact, the gist of the article is that our industry is expecting a lot more of those idle assets to result in new acquisition activity. A lot of it did just that in 2010, but there’s every reason to expect a lot more acquisition activity in 2011.
At least daily, we get a communication from a corporate or private equity acquirer announcing deals and/or seeking deals of a specific type and/or within certain financial parameters. If you are a company owner contemplating your options, now would be a good time for us to discuss them.