News last week that Warren Buffett and a fellow billionaire are teaming up to buy the Heinz ketchup company was yet another sign that a lifeless merger market is finally picking up.
H.J. Heinz Co. announced Thursday a $23.3-billion deal to be purchased by Buffett's Berkshire Hathaway and 3G Capital, co-founded by Brazilian billionaire Jorge Lemann. That came the same day American Airlines and US Airways announced their $11-billion merger. Two weeks ago, Michael Dell said he struck a $24.4-billion deal to buy back the computer company he founded.
The year was already shaping up to be a big one for mergers. U.S. mergers total $219 billion year-to-date, the fastest start to a year since 2000, according to Dealogic. By this time last year, mergers had totaled just $85 billion. Globally, merger activity has been tepid since 2007, when there was $4.6 trillion in deals. Last year's total was $2.7 trillion.
One reason activity is picking up: Financing deals is cheap, with interest rates near record lows. Companies are also sitting on piles of cash, with those in the Standard & Poor's 500 index holding nearly $1 trillion on their books.
Moreover, after years of slashing expenses and squeezing more work out of remaining staff, companies are struggling to grow earnings. In the January-March quarter, earnings are expected to climb less than 1 percent compared with the year earlier, according to FactSet, a financial data provider. -- AP