The ‘perfect environment’ for dealmakers: Morning Brief

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Here are the takeaways from today’s Morning Brief. sign up Every morning you will receive the following message in your inbox:

Merger activity is finally starting to pick up steam.

So far in 2024, global trading activity has increased 55% compared to the same period last year, according to Bloomberg. And large deals are especially popular, with 56 acquisitions valued at more than $500 million announced this year in the U.S. alone, according to Dealogic. This week, his $35 billion proposed acquisition of Discover (DFS) by Capital One (COF) became the latest mega-merger announcement.

Combined, the total amount exceeds $277 billion, the largest amount in at least the past five years.

This all sounds great to line the investment bankers’ pockets in fees, and it’s a blessing in disguise for the shareholders of the targeted companies. But what can retail investors do with this information?

Most investment professionals we spoke to say it’s difficult and unwise to pick stocks based on whether they’ll end up being acquired.

Rather, the surge in trading may be better viewed as a sentiment tool. And so far this year, the results have been positive.

Jay Woods, chief global strategist at Freedom Capital Markets, told Yahoo Finance that the activity was a “confidence builder in the market.” “Interest rates have stabilized, allowing companies to pursue deals with more confidence. While the number of deals is not excessive when there is euphoria, the size of deals appears to be larger than usual. ”

Another Jay, Hatfield, CEO of Infrastructure Capital Advisors, echoed similar sentiments, saying that active debate over the timing and size of rate cuts still suggests that the next move in rates could be lower. He pointed out that it was suggested.

“We think this is a great environment for companies to raise capital and pursue their consolidation goals,” he told Yahoo Finance Live.

Regardless of whether acquirers are making acquisitions for offensive or defensive reasons, the increased activity appears to be indicative of two factors. It is confidence in a certain level of economic stability and, at the very least, that borrowing costs will not rise. .

All of this is creating, for lack of a better word, a bullish macro atmosphere in the market.

More specifically, Hatfield expects traditional investment banking leaders Goldman Sachs and Morgan Stanley, where he worked early in his career, to benefit as trading activity picks up. are doing.

“When you’re actually inside it, you see that investment banking is not only good for the investment banking department, but it’s also phenomenal for sales and trading,” Hatfield said.

“And once a salesperson assigns a deal, there is usually flow back, which is good for asset management as well.”