The high prices reflect companies going on the offensive to boost their earnings. The economy, while growing, still isn’t booming. Since the end of the recession, companies have had to act defensively — protecting profits by cutting costs through layoffs or benefit reductions or by moving manufacturing elsewhere.
In an effort to lift earnings and please shareholders, S&P 500 companies have also announced plans for nearly $1 trillion in buybacks over the next several years, and more than four-fifths of them now issue a dividend, the highest proportion since 1998.
With their tool box nearly depleted, corporations “are looking for that extra bump” in sales now, Walsh said. A lot of Deloitte’s M&A business has been with companies “looking to expand their product lines or expand geographies.”
Buying Time Warner Cable gives Comcast roughly 30 million customers in markets such as New York City. For Facebook, WhatsApp is an opportunity to buy a fast-growing message service that is popular in emerging markets and Europe. Ireland-based Actavis gains both a broader variety of drugs to sell and a larger sales presence in the U.S. with its acqusitions of Forest Labs.