With Apple’s $3 billion acquisition of Beats Electronics and huge telecom and cable company sales in the works, a megadeal storm has hit techland. But one technical ingredient that has fueled big deals may begin to dry up: ultra-low interest rates.
We could already be seeing the effects of a gradual shift in the Federal Reserve's interest rate policies at the margins of the M&A market. The amount of money that companies borrowed to do acquisitions has grown since the end of the recession, from $162.6 billion in 2010 to $294.4 billion in 2013. Over that time bond issuance increased too, from 311 to 574 deals, according to data from S&P Capital IQ.
But as the Fed bought less government debt this year, effectively making money a little less cheap, M&A-related debt issuance dipped by about 17% in the first half of 2014 versus the first half of 2013.