Acquisitions pace is picking up

As evidence that many of the fears running (like Chicken Little) rampant through the financial markets are overblown, many acquisitions are being announced.  Unlike professional money managers, or individual investors, both of whom are prone to skittishness, these investors are putting hard capital into real businesses that they intend to manage for profit.  Those business interests also have their prices determined in a marketplace.  So these acquiring firms would be foolish to be buying now if they had fears of a “double dip” recession because in such a scenario the prices of all businesses would decline and they could buy the same business for lower prices.  Thus, buying right now is an indication of two things, a belief in a stabilizing economy, and that asset prices are only going to increase from here.

I will not go into all of the deals, but they include: Universal Health Services buying Psychiatric Solutions; Prudential PLC buying AIA Group (an insurance company); and Man Group buying GLG partners (a hedge fund).  This latter deal is especially interesting.  Hedge funds have the reputation of housing the “smartest” investors.  Thus, if Man Group is willing to commit capital now, and in a firm whose value fluctuates with financial markets, it is a very strong indication that the economy has stabilized, likely growing, and that market fears are way overblown.  In yesterday’s post I said as much.

Jason