Something big is happening on Wall Street that is making investment bankers richer. It is also supposed to signal better times ahead for the rest of the country.
A boom in mergers and acquisitions is taking place, and the stampede is expected to continue even after two headline-grabbing deals – Rupert Murdoch’s bid for Time Warner and Sprint’s attempt to buy T-Mobile – crumbled this week.
A sharp upturn in deal activity is often thought to herald a stronger economy and a buoyant stock market. The theory: Corporate chieftains see strength building in their business lines, which gives them the confidence to pursue ambitious acquisitions of other companies.
“The corporate sector has been kind of out of it in creating any sort of growth,” Savita Subramanian, an equities strategist with Bank of America Merrill Lynch, said. “So maybe this is the first salvo in a corporate-spending-driven economic recovery.”
So far this year, $2.2 trillion in deals have been announced globally, according to data from Thomson Reuters. That total represents a 67 percent increase from the same period last year, and it is setting up 2014 to be a robust year for deal-makers.
While the surge creates a hefty payday for investment bankers, it is also one more piece of data – along with figures showing job growth – that suggest the U.S. economy is poised to accelerate out of the doldrums that followed the financial crisis of 2008.