Mergers Might Not Signal Optimism

[Commentary] A boom in mergers and acquisitions usually signals confidence in the economy, and recent headline-grabbing deals evoke images of chief executives and directors cheering about their business prospects and overall growth.

So far in 2015, deal-making activity in the United States has topped $775.8 billion, up nearly 50 percent compared with figures in the period in 2014, just behind deal volume in 2007, according to Thomson Reuters. A steady parade of multibillion-dollar deals have been announced: Charter’s $55 billion acquisition of Time Warner Cable, Teva Pharmaceuticals’s $40 billion hostile bid for Mylan and Avago Technologies’s $37 billion takeover of Broadcom are among them.

But in contrast to previous merger booms, this recent spate of deals shouldn’t necessarily be considered a barometer of a healthy economy. If anything, it might be an indicator of the troubles that lie beneath an overheated stock market.