US Presidential Elections scheduled for next week has triggered a surprising trend of Mergers in 4Q of 2016. The month of October has become the second biggest month ever in US history recording 602 transactions worth $329 billion, just $3 billion short of the record in July 2015.
Going with the latest deal, telecom group CenturyLink on October 31st, 2016 announced that it is acquiring Level3 Communications for $34 billion including debt, while General Electric, fondly known as GE unveiled its plans to merge its Oilfield unit into Baker Hughes business entity. The market value of this merge is set to be of $45-50 billion.
The two deals and some slew of takeovers came at the end of last month when the presidential elections entered the homestretch. The outcome of elections 2016 in US s said to influence key economic policies, including international trade and taxes on a long run.
Markets are also going to raise the cost of debt as the Federal Reserve has decided to increase the interest rates in December. Investment bankers are predicting that in future markets will prosper due to higher interest rates down the road as the spurred companies will pull the trigger on deals.
The ongoing trend gives us a hint that companies are having a lot of confidence in the US economy in coming days. The CEOs and Boards are fairly comfortable with where there are placed in the market on a current note and wish that there will be no big drop in the near-term horizon.
According to a survey conducted by Dealogic, the month of October witnessed an acceleration in deal making. While the first three-quarters saw a dull phase, the 4Q emerged as a sweet tenure for US deals.
However, the most controversial amongst the deal was AT&T’s plan to buy Time Warner, which received a support from US 2016 Presidential probable Hillary Clinton and received sharp criticism from another US election 2016 probable Donald trump.
Other large acquisitions include British American Tobacco’s proposed deal of $47 billion buyouts of the remaining stake in Reynolds it doesn’t own. The other big deal is Dutch Company NXP being acquired by Semiconductor company Qualcomm for $47 billion.
Thus, all these developments lead to the fact that the overall economy will remain in a good place after election results and will not be influenced by White House or Congress decisions on interest rates.
