“Each of the last six great merger waves on record” — going back more than 125 years — “ended with a precipitous decline in equity prices,” says Matthew Rhodes-Kropf, a professor at Harvard Business School and an expert in mergers and acquisitions.
Mark Hulbert examines the current frenzy in Merger and Acquisition activity and its implications for the stock market as a whole. The use of the word “precipitous” in the quote above does give one pause.
Professor Rhodes-Kropf is convinced this will all end badly though neither ventures to predict when the “peak” of the current M&A boom will arise. Until then, the trend is decidedly up. Party on, I presume.
The bottom line? Unless you can find some other way of defusing the historical precedents, you should squarely face the prospect that the current merger wave will — just as was the case following each of the previous six — end with a precipitous decline in stock prices.