Monday, January 4, 2010

Large Premiums for Takeovers

American companies are currently paying the largest premiums for acquisitions ever on record. Company executives seem to be so confident in an economic recover that they are currently buying for prices that are 37% higher than the average amount since records on these transactions have been compiled (2001).

According to Sanford C. Bernstein, there also exists the possibility that mergers will rise 35 percent in 2010 and 23 percent in 2011. The forecast is based on an analysis using data since 1980 that incorporates growth in GDP, corporate earnings and commercial loan volume. These figures have about a 72 percent correlation to takeovers.

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