It's only June and mergers and acquisitions deals are over $2.3 trillion and set to beat last year's record of $3.6 trillion. On average, this year, buyers have paid a whopping 50 per cent over market capitalisation for their acquisitions, double the premium paid last year.
Private equity deals accounted for $489 billion of that, representing 21 per cent of all M&A activity, In Europe private equity firms borrowed 115 billion euros and have raised $263 billion in funding.
The prices paid seem barmy. Blackstone bought the Strada pizza chain for $5 million per site. Terra Firma's offer for EMI assumed a borrowing requirement which meant that the interest would account for 80 per cent of EMI's earnings.
Who, one wonders, will have the money in three years' time - the upper limit to the the time private equity funds like to own a busines - to buy all this stuff at a profit to the PE funds? Goddness knows
How silly can it all get? The answer is, probably, sillier still. These financial types are ace at spinnig numbers; nerdish when it comes to relating to reality. Look at the crazy prices paid in the junk bond boom. And where did it get them?
Into jail.
Subscribe to this blog's feed