This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

First-Quarter M&A: Bigger

The first quarter of 2006 will be remembered as a huge one for mergers and acquisitions.

With AT&T's (T - Get Report) acquisition of BellSouth (BLS) pacing the trend, total merger volume in the U.S. was $331 billion from January through March, according to Thomson Financial, up over 19% from the first quarter last year.

But behind the headlines, a subtler trend has emerged. The total number of deals this quarter fell from both the previous and year-ago periods. With rising interest rates, higher stock prices and an economic expansion in its third year, companies may start being more cautious about their acquisitions.

"Despite the fact that we are growing at a good pace, the growth rates are going to slow," said Marc Pado, chief market strategist at Cantor Fitzgerald. "That in and of itself makes chasing a deal less desirable."

On average, total value per deal was $1.49 billion, compared with about $1.23 billion in the first quarter last year. Larger transactions kept the M&A market buoyed; it was a number of smaller ones that petered out.

Many of the deals announced this quarter were from private equity companies, including Blackstone's acquisition of CarrAmerica Realty (CRE) for $5.6 billion. Their acquisitions usually come with a heavy debt ticket, something that will get more expensive with rising interest rates.

"Not all of these deals are done by using cash," said Pado. "If there is any debt already or if they are going to have to incur any debt to make the purchase or combination, then the less profitable the deal will be."

Many companies have also done a significant amount of levering and refinancing over the past few quarters, often using proceeds to buy back shares or pay dividends. As firms begin closing in on their leverage capacity, issuing new debt won't be quite as easy.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GOOG $750.26 0.00%
T $33.57 0.00%
AAPL $117.81 0.00%
FB $105.45 0.00%
TSLA $231.61 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs