M&A activity is heading for the dust bin. The should put additional pressure on the earnings of big Wall St. banks and brokerages. According to the FT," KPMG's Global M&A Predictor – an index that looks at 1,000 companies and the ratio of their share price to earnings – is forecasting a decrease in both appetite and capacity of companies to make deals."
The major reason for a potential shift in M&A sentiment is the failing P&L prospects of many companies as the economy falls under more and more pressure. Who wants to buy a company which is likely to do poorly?
Short-term, the real burden of the fall-off in deals will be investment banking operations. With the financial fortunes of many firms like Lehman (NYSE:LEH) and Morgan Stanley (NYSE:MS) already in enough trouble to cause worries about whether they can stay independent, losing most of their fees for merger advisory service comes at an especially hard time.
When it rains, it pours.
Douglas A. McIntyre is an editor at 247wallst.com.
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