Will an M&A Boom Lift Sagging Markets?

Leo Kolivakis's picture

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mynhair's picture

M&A is the last resort of the unimaginative.  If it were worth a shit, some vulture like Cerebrus would already have done it.



Mitchman's picture

Well, Cerberus certainly loves the "A" part of M&A.  Let's see.  In 2007, I believe, they acquired Chrysler and they acquired GMAC. How's that for earning your 2 and 20?  :-)

mynhair's picture

Yep, Cerebrus is always ahead of the curve.

Like I said, M&A is for morons.

geno-econ's picture

Wonder if anyone has done studies on impact of M&A on employment . Productivity no doubt is enhanced as well as pricing power and global competetivenes . This brings us to the observation that the economy is driven by global forces and national well bieng is sacrificed . While the US in the past has had many advantages , more recently we are losing our edge for many reasons:

         Dwindling crude oil production

         Mobility of technology

         Emergence of developing economies (cheap labor)

         Debt financing spiral--- Keyensiam gone amuck

         Political corruption , unjust tax system and hocus financial engineering

         Unsustainable entitlements ,health system ,pension regimin--Leo?

There are many more US disadvantages that overshadow Yankee innovation etc. but does Leo really believe M&A is the  answer ? Me thinks not



anony's picture

Will the 6,000 mergers and acquisitions result in even greater unemployment?

Those who cheer the conglomeration of companies are men who have vision no further than the length of their noses.

Kayman's picture


It's even shorter than that- their dicks....

Chip's picture

Don't kid yourself--it's already starting. Just not too fast to move the market:



kaiserhoff's picture

Buy Chinese solars.  Smoke more hopium!

Thanks for the eye candy and the shots of Santorini, Leo.  Haven't been yet, but it's on my short list.  Hell, the way this crappy, rigged market is going, you may even be right once in a while.  God knows there are no blue chips left.

Leo Kolivakis's picture

Friday was option expiration. The crooks and their algos were busy all this past week rigging several stocks. It's amazing the amount of nonsense that goes on during option expiration week. I should take snapshots of various stocks and the open interest on puts & calls just to document the shenanigans. Of course, the SEC is all over it...NOT!

traderjoe's picture

So true, Leo. I watch AAPL get pinned every week, for one. Which other stocks do you find they are successful on?

Leo Kolivakis's picture

Pick any of the big names, and look how they perform during options expiration weeks. It's quite laughable, but these are "free" markets. Many investors are rolling positions forward to September expiration, when there is the quarterly expiration of equity futures and options:

"With today being August options expiration, option traders are busy rolling positions out to the next month, September, either to extend a profitable position, or extend a losing position in hopes of turning the trade into a winner," said Joe Kunkle, a founder of analytics firm OptionsHawk.com in Boston.


August options on individual stocks go off the board on Friday after the close and settle on Saturday.


"During September expiration, investors typically reassess their positions at the end of the third quarter and then make their plans for the year-end and beyond," said TD Ameritrade chief derivatives strategist Joe Kinahan.


Overall options action seems to reflect cautious investor sentiment after two weeks of losses for the stock market, said WhatsTrading.com options strategist Frederic Ruffy.

lbrecken's picture

blah blah blah ....M&A activity always gives ST boost but it foreshadows slowing growth as cos. attempt to grow via consolidation rather than end demand growth.  Jez its 101 yet still no one sees the forest from trees

divide_by_zero's picture

Still puzzled by the Intel McAfee buy, normally you buy the best with that kind of money on hand, not a second or third rate AV company.

SoCalBusted's picture

Me too.  Intel has enough smart people and money to build vs. buy.

blunderdog's picture

Intel's a hardware company, not a software company.  Even their hardware isn't that great.

I suspect this is just about finding another way to generate revenue off the large computing public--if you just sell them processors, you don't get a renewable revenue stream.  AV "subscriptions" are perfect.

ZackAttack's picture

It sounded to me like this wasn't intended for the general PC market.

What they *say* it's about is providing on-chip security for embedded systems

Leo Kolivakis's picture

Celente thinks 'Too Big to Fail' Is Killing the Middle Class:

August has been a hot bed of merger & acquisition activity, including:

  • — Intel to buy McAfee for $7.7 billion
  • — Mining giant BHP Billiton wants to takeover agricultural goliath Potash for $40 billion.
  • — Dell to buy 3PAR for about $1.2 billion in cash
  • — First Niagara Financial Group agreed to buy Connecticut’s NewAlliance Bancshares Inc. for about $1.5 billion in cash and stock.

M&A activity is generally viewed as a good sign for the market and economy.

To the contrary, says Gerald Celente, director of the Trends Research Institute. “This country went from a nation of Main Street, mom and pop businesses to Wall Street and 'too big to fails',” he tells Tech Ticker in this clip. ("Not only were they 'too big to fail,' they were 'too big to jail'," he says of Wall Street execs.)

Deregulation and bailouts favor the country’s largest corporations, at the expense of small business, Celente believes. “They’re squeezing out everybody else." Policies like these have created the widest wealth gap in the industrialized world, he says; “10% of the nation controls 93% of the assets."

Former IMF Chief economist Simon Johnson makes a similar point in his book, 13 Bankers. In it, Johnson claims, six banks (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) control 60% of America’s gross national product.

The only way to turn the tide, says Celente, is to “put back what was in place that worked,” like the Glass-Steagall Act and the Sherman Antitrust Act, which exists in name only. “That’s what stopped the robber barons from raping the country.”

Celente is confident more regulation on the largest companies will help entrepreneurs, which in turn strengthening a fading middle class – the backbone of our society. “America becomes strong again when the middle builds big again,” he says.

Unfortunately, Celente sees the trend going in the opposite direction. “The merger of state and corporate powers, let’s calls a spade a spade. It’s fascism.”


ZackAttack's picture

Hmmm... $2.03 trillion in corporate cash.

Let them pay the bulk of the bailouts, then. After all, so many of these financial contrivances are only there to benefit corporations. I don't give a flying fuck whether there's a functioning commercial paper market, for instance, or whether AIG or any of the investment banks lives another day or not.

The Intel deal makes a modicum of sense. They want on-chip security for their embedded systems. Good idea, rich price. They could've gotten a lot more than a lot less than McAfee, though. Typical corporate brain-dead decision.

BHP's always wanted to make itself the commodity supermarket for the world, so Potash is a pretty logical buy. I don't think most people realize what a precarious situation the world food chain is in. We're OK with one bad year, but two would be very serious trouble for many places on earth.

The kind of deals that are utterly useless are things like, oh, the abortive Sallie Mae purchase by Cerberus. Obviously, they wanted to strip the bones of anything valuable, load it up with debt, spin it off again. Wash, rinse, repeat. Too bad they were too connected to fail for all the dumbass deals they made.



equity_momo's picture

Sorry Leo youre wrong.  M/A and stock buybacks are typical late cycle plays and just confirm what most investors understand right now - we are in a gnarly giant topping phase that will end decidely bearish.

This is not the saviour you are looking for - in fact its a warning.

TeresaE's picture


More job losses, more empty buildings, more "investment" (transfer) on foreign soil.

Which equates to fewer customers for the rest of us, more people on unemployment & food stamps and good times for all.

Make your money while the making is good.

DiverCity's picture

Exactly what kind of drugs is brother Leo on?

doggings's picture

Exactly what kind of drugs is brother Leo on?

really strong euphoric ones.

Crisismode's picture

Yet another piece of LK drivel.


Why do people even read his inane crap.


He is delusional beyond belief, and still people pay any attention?



Reese Bobby's picture

Well you read it.

And at least it wasn't about a stupid Canadian Fund's rebound performance.

When there is no end market demand growth or attractive cap ex opportunities then M&A is to be expected.  Expand your corporate empire and harvest G&A expense cutting opportunities.

But another poster is correct.  With dividend tax increase less than 6 months away it would probably make more sense to return capital to shareholders through special dividends.  But that would not offer CEO's the maximum compensation opportunities.

Actually a lot of companies should borrow cheap money and pay dividends.  Why aren't we seeing more of that LEO?

David449420's picture

Sorry, Leo.

The way you see the world, is not even close to the way I see the world.

All of this is just absurd attempts to pretend that the inevitable will not occur.

You're probably 1 or 2 stages up from where I am.

If I can avoid debt slavery in the next few years, then I will consider that I have succeeded.

Finally, just out of curiosity, what color is the sky in your world ?


PS. I am a Canadian with a background of 20 years service in the Military. 



Howard_Beale's picture

Having known and cared about Leo for over a year now, his skies are full of rainbows and unicorns, with scattered flying ponies on cloudy days and puppy dogs everywhere.

williambanzai7's picture

Er, you seem to have forgotten the lollipop trees...

Howard_Beale's picture

I most certainly did. Loved you BB Facebook, WB. I have been off the site for a while with personal and family matters. 

P Kennedy's picture

Leo- quick answer your title's question: M&A will harvest the good ones strategically,  and the puffed out limps for accounting creativity. Just waiting for the perceptual inflection point: do we proceed onwards, or proceed to hell?

Lot's of money wants to be in motion......

Astute Investor's picture

"I wouldn't say that CEO confidence is a 10 for M&A; I would say it's more of a 7," said Jeffrey Kaplan, global head of global mergers and acquisitions at Bank of America Merrill Lynch. "This week's deals are about the ultimate expression of confidence."

It's ironic that investment bankers have the worst timing when it comes to M&A, their self-proclaimed area of expertise.  They always have a lot of "confidence" and massively overpay at the top.

CSFB / DLJ -- circa 2000

Chase / JPM -- circa 2000



traderjoe's picture

So many of the deals are done out of desperation to keep the CEO's/board in power and occupied, and perhaps even distract the employees from the deterioration of the fundamentals. Look at the Dell/Perot Systems acquisition. CEO's get incentivized to "grow" revenues, and the companies can throw some non-GAAP charges in their results for a little while. 

And their timing is typically terrible. The entire market cap of DTG was $20 million at the crisis low. Probably could have taken the company out for $100 million plus liabilities. Now HTZ and CAR are fighting for it at $1 billion+. If travel falls back again, will the acquisition bring the acquirer down?

Of course, "The Strategy Session" on CNBC, with the King of M&A David Faber says that M&A shows the "confidence of the CEO's" - which you repeated above. Silly. It's in their self-interest to do deals, not their shareholders. The POT CEO getting $450 million to have the company get bought out? Absurd. 

It's all a con game, and you are playing along nicely. How did that GDP & NFP payrolls treat ya? The jobless claims number Thursday? Philly Fed? How are the truck car loading statistics lately?

Graphite's picture

LOL, I love it when people use "historical averages" starting in the year 1990. Here, let me calculate a mean using a period of the greatest manias in modern financial history. Surely, the markets *must* revert to that mean.

I see Leo also retreads the lie that companies are "cash rich," which requires one to look only at corporate assets and ignore their liabilities. It's like saying that someone who takes out a HELOC on 100% of the value of his home and deposits $300K in the bank is "cash rich." He may have a lot of cash, but every penny of it is owed to someone, with interest.

Monkey Craig's picture

well said...looking at just the assets will get you in trouble - ask any BP investor pre-4/20/2010

mynhair's picture

Bp - present.  Lost my ass on that POS.

Hdawg's picture


Small coincidence these moves have happened after the announcement of further Fed monetising, i think not.

M&A will not lift the market but in nominal terms the flood of money printing will.  In terms of physical gold or silver it's going to crash. 

These are all cash offers i.e.  These boys know the deflation story is either short term or a head fake until the inflation storm hits so they cashing in their chips for a real asset.

Just a bit suprised China has not speeded up it's dumping of the USD in a similar way.

ex VRWC's picture

Leo, I got your market right here:


More here:


C'mon and jump in people - we need more of these!


hungrydweller's picture

Yup - and all of this M&A activity leads to increased layoffs and continued deterioration in overall GDP.  Lose-Lose for everyone.

Bottom line is that companies have cash that was generated from efficiency gains over the last two years (i.e., layoffs) and they have to do something with it.  Screw dividends - that's so 1950's.  Can't invest in their own businesses since overall demand continues to decline.  Forget hiring back workers until demand picks up.  Whatever - managements just buys up anything that makes them look good and pads their own wallets.

Astute Investor's picture

The stocks of 53 companies that made the biggest purchases from 2005 to 2008 lagged behind industry peers two years later, according to data compiled by Bloomberg’s ranking group. Among the worst performers were McClatchy Co., Boston Scientific Corp., and Sprint Nextel Corp., all three of which are now valued at less than the price they paid for their acquisitions.

The vast majority of acquisitions are net destroyers of shareholder value.  Full Stop.  It's simply a value transfer from the shareholders of the acquirer to the shareholders of the target.  Clearly a P.T. Barnum situation when it comes to M&A - the primary beneficiaries are the agents - management lawyers, bankers accountants, etc. - all at the expense of the shareholders.  Unfortunately, the M&A charade continues in a never ending cycle despite the overwhelming evidence that marginal value is actually created.


Deals executed during a financial boom tend to turn out worse than those done in a slump, according to research by Roos. Even so, a lack of access to cash and credit can lead companies to shelve purchases at the most opportune time. The global economic slowdown that began at the end of 2007 coincided with a collapse in the M&A market, with annual takeover volume falling by more than half from the peak, to $1.8 trillion last year.

“If you can get things at low prices, you’re going to make money,” said Donna Hitscherich, a senior lecturer in finance at Columbia University and a former M&A banker. “But you have to have the courage of your convictions.”

This is real value-added analysis from BCG and Columbia Business School.  Deals turn out badly when you overpay so the outcome should be more favorable for the acquirer if they buy at a lower purchase price.  These clowns could be 2nd rate retail brokers -- Buy Low and Sell High!


Mentaliusanything's picture

So Leo, your saying that what the World needs now is a lot of AOL- Time Warner M&A's.

Tell me how that worked for the betterment of anyone.

Think Gresham's law of Bad money chasing out Good.

You want me to list all the winners from M&A's. I will write them on the back of a postage stamp. Buffet on the other hand could make shit sandwiches and sell to the punters as Foi gras

Kayman's picture

M & A is solely about controlling market share to the detriment of the competitive market. Pricing power over the consumer will shrink the economy not grow it.

russki standart's picture

Dear Leo

if the market goes into the sh"tcan, based on the horrid market fundamentals and techicals, M&A will do nothing to lift the markets. Most deals happen when equity prices are rising, not falling.  Otherwise, you are on the money <g>

Muscletonian's picture

Leo Leo,


So now its M&A that should take you out of the latest buy on dip failure, was it 1100 you bought S&P. Still holding that sour dough, where is your stop or are you averaging down?

Get a grip, this market is going south due to the phenomena of depression, the global 15 trillion bailout package will never occur. And what has happened so far has not helped a bit.


Buy DAX sell Eurostoxx as we are heading for new sovereign crises in Europe.


I must though give you that you are persistent in your advocating of higher stock markets, but whom do you think your fooling.



covert's picture

I never understood the extreme desire to buyout the competition. why not run them out the hard way?