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The Era of Globalized M&A

According to a study by J.P. Morgan and Thomson Reuters, speculators led to the overvaluation bubbles in technology and telecom stocks during the "dot.com" era and "piled into commodities and real estate during the bull market of 2007," leading to an overvaluation in that market above normal inflationary levels. In the analysis, the two M&A cycles J.P. Morgan identified were the product of "very distinct bubbles and rapid global growth."

The study, covering a 19-year period beginning in 1990, says the "dot.com" bubble's origins can be traced to venture capitalists spawning numerous technology companies following the rapid expansion of the Internet. In the later bubble involving commodities and real estate, the report's author cites highly leveraged transactions fueled by inexpensive debt as the underlying cause, along with the rapidly growing tiger economies of Asia, which spurred demand for oil and steel.

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The Era of Globalized M&A
Among the findings, the report concludes:
- Expect to see further M&A activity in sectors, such as healthcare and TMT, which appear to consolidate during downturns;
- In real terms the most recent boom and bust in M&A was not as high as the previous dot.com boom as a percentage of global GDP
- Emerging markets demonstrate growing maturity and currently outpace the US market both in terms of target and acquirer cross-border activity
- M&A is confidence-driven rather than opportunity driven as demonstrated by the surge and decline in activity relative to the broader macroeconomic environment
  
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