The prime factors that can convince cash cows to undertake a merger and acquisition spending spree are falling into place and this can lead to rally of the European equity markets currently on flat spin.
The rally began last June 2012 and has helped drive STOXX Europe 600 Index to record highs for the last five years and is now showing signs of letting up. A rebound though is being projected that can help boost the market again to new heights.
According to research by Credit Suisse, the mergers market typically lags behind the stock market by an average of twelve months. This means that the activity should start picking up in the next twelve months, with equity markets rising by 9% after a dip in the markets.
The merger industry is at its slowest pace in Europe, the Middle East and Africa since 2003 but there are good omens that financially able companies are wiling to start participating in the market. One of the signs is the level of corporate debt which is at its lowest since the 1980s, funds are aplenty and many target companies are tagged at cheap prices.
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