Jefferies sees jump in mergers of equals as coronavirus hammers economy
[NEW YORK] Jefferies Financial Group said it expects a jump in mergers of equals in the current coronavirus-stricken economic environment as companies look at cost-effective ways of increasing their scale to survive the crisis.
The mergers-of-equals transactions can help companies cut expenses and boost earnings without the "stigma of transacting at lower values, premiums or multiples," Jefferies said in its July newsletter.
The coronavirus crisis has caused demand to plummet across industries such as retail and travel, hurting revenues and making it difficult for many firms to raise new capital.
"In the current economic environment, scale has become only more critical, as the impact of the Covid-19 pandemic has cast a harsh spotlight on sub-scale enterprises," Jefferies said.
The US investment bank also said that a "V-shaped" economic recovery was a long shot, given the risks of withdrawal of fiscal stimulus and a second wave of virus infections.
A new wave of cases, however, could trigger more monetary easing from the US Federal Reserve and as a result strengthen stock markets, Christopher Wood, head of global equity strategy at Jefferies, said.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
REUTERS
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
International
Gas prices are putting Washington’s boldest climate policy at risk
India collects record 2.10 trillion rupees as goods and services tax in April
China travel surges for May holiday but consumers remain wary
Macau casinos remain resilient in April as consumers seek fun
Japan may introduce tax breaks to spur repatriation into yen: Sankei
Asset owners can’t afford to sidestep sustainability