Bloomberg Television - Firms That Spent Billions on M&A Are Dumping Assets
The discussion highlights the current state of mergers and acquisitions (M&A), noting a 16% rise in overall volumes this year. However, many deals made during economic boom times are now being reassessed due to higher interest rates and unmet synergy expectations. Alibaba's sale of a department store chain for $1 billion, which is 30% of its original valuation, exemplifies this trend. Companies rushed into deals during periods of low interest rates and fierce competition, often without thorough due diligence. Now, with higher interest rates, companies are more cautious and focused on profitability rather than growth. Examples include Just Eat's quick sale of GrubHub and Teladoc's significant write-down of its Livongo acquisition. Investors are now prioritizing profit over growth, prompting companies to be more strategic in their M&A activities.
Key Points:
- M&A volumes have increased by 16% this year, but many past deals are being reassessed.
- Alibaba sold a department store chain for $1 billion, 30% of its original valuation.
- Companies rushed into deals during low interest rates, often neglecting thorough due diligence.
- Higher interest rates are causing companies to focus more on profitability than growth.
- Investors are prioritizing profit, leading to more strategic and cautious M&A activities.