For hungry Wall Street investment bankers, the $45 billion merger of InBev and Anheuser-Busch Cos. (NASDAQ: BUD) is a nice relief. Yes, it means lots of juicy fees.Another big winner is Busch IV (the CEO of Anheuser). Apparently, he is negotiating a consulting agreement that may exceed $10 million (there will be a $120,000 monthly retainer through December 31, 2013).
But according to a piece in Reuters, the transaction may have a dark side. Simply put, it hasn't been easy to raise the debt financing. As a result, this may crowd out some of the financing of other M&A deals.
The high rates on the InBev financing is likely to push up other debt costs on other pending transactions. What's more, there will be a flood of bond issuances on the market, which will put further pressure on the debt markets.
In other words, we may see a slowdown in M&A activity for the rest of the year -- except for those buyers that have substantial balance sheets.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
8-18-2008 @ 10:38PM
Mike Sanders said...
Let's not forget the aquisition of EDS, by HP. This was done for a song... HP has a very strong balance sheet, but lacks penetration of many IT outsourcing markets, particularly government contracts. If Obama should win, I expect triple-digit growth in the government sector of it's business. I haven't yet seen EDS come out with a statement, supporting Obama, but it looks like they could. Anyway, M&A activity should pick up, after the elections, regardless. Too much uncertainty, at the moment. I would rate HP a STRONG BUY, in the case of an Obama win... Still a BUY, with McCain and a HOLD, should the Idependants take the White House.