American companies have announced $1.5 trillion in deals this year, including $100 billion announced just this Monday- driven by- and driving- the market higher. . Bobbi Rebell reports.
The trading floors are buzzing with deal talk. $100 billion worth of merger and acquisition activity Monday alone; $1.5 trillion so far this year. That's the most since 2000. And that is good news for stocks. Voya Financial's Paul Zemsky SOUNDBITE: PAUL ZEMSKY, CIO MULTI ASSET STRATEGIES, VOYA INVESTMENT MANAGEMENT (ENGLISH) SAYING: "We think mergers are good for the market. It raises prices so first it takes stock out of the market. Second it shows that companies are confident in their outlook. They are willing to spend money and do the merger so that is also good. And we think it is good governance because stocks are not incredibly expensive so companeis are not paying too much yet." And companies are using that stock to pay for the deals. Both of Mondays big deals, Halliburton buying Baker Hughes, and Actavis buying Botox maker Allergan, are being paid for partially in stock. And with interest rates still at record lows, the cost to finance the deals is also helping. Omega Advisors Vice Chairman Steve Einhorn: SOUNDBITE: STEVE EINHORN, VICE CHAIRMAN, OMEGA ADVISORS (ENGLISH) SAYING: "I think if one looks at the fundamentals that tend to bring about merger and acquisition activity the cost of debt is quite low, the availability to finance in the debt marketis quite high, cash flow of the corporate sector is close to a record. Cash on the balance sheets of the corporate sector is at a record. Those suggest to me that M&A activity will continue robust for the next couple of years." The M&A frenzy though - does raise concerns that the finincial markets, which are at record highs, could get knocked down as they have in past after deal surges, something Einhorn disputes. SOUNDBITE: STEVE EINHORN, VICE CHAIRMAN, OMEGA ADVISORS (ENGLISH) SAYING: "I don't think at all it signifies a market top. Nothing that we look at in terms of the current business cycle and or monetary policy and or aggregate market valuation suggests the U.S. equity market is at a top, and in fact, we expect that over the next year and two perhaps longer shares in the US will continue to lift in line with earnings." One area under scrutiny - tax inversion deals. Although Medtronic has confirmed its $43 billion dollar deal to buy Dublin-based Covidien is on track - the Obama administration is cracking down on deals meant to lower corporate taxes.