Skip to Content
Credit Insights

We Expect Pace of M&A to Increase in 2011

The weak economic environment has made M&A an appealing way to 'purchase' growth through bolt-on acquisitions, while some sectors are still suffering from overcapacity, making the build versus buy decision tilt to the latter.

Mentioned: , , ,

Credit spreads were generally unchanged last week as market participants begin to switch their focus to the beginning of earnings season. A few large deals drove the new issue market, but new issue volume was lower than we would have thought and secondary trading was lackluster.

As we have written in past articles and our quarterly outlook, we expect a significant pickup in mergers and acquisitions in 2011. We attribute the resurgence in M&A activity to a number of factors. Companies are starting to seek M&A as a means to attain growth and improve profitability amid dismal internal growth opportunities stemming from the secular slowdown in GDP. The weak economic environment has made M&A an appealing way to "purchase" growth through bolt-on acquisitions, particularly as the economic downturn has shone a light on which companies' earnings power is sustainable. Further, some sectors are still suffering from overcapacity, making the build versus buy decision tilt to the latter.

David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.