Global takeover frenzy fuelled by debt: analysts

Comments | AFP, December, 2006

LONDON (AFP) — Frenetic global takeover activity this year has been driven partly by an over-reliance on debt and this could cause problems if economic growth slows or interest rates rise, analysts say. The total value of takeovers across the world in 2006 stood at 3.427 trillion dollars (2.619 trillion euros) on December 10, according to Canadian financial information provider Thomson Financial.

That was higher than during the height of the dotcom Internet bubble in 2001. In 2006, an increasing number of mergers and acquisitions (M and As) have been financed largely by debt, in particular via the increasingly popular method known as a leveraged buy-out (LBO). LBOs are usually based on a relatively small amount of actual capital or cash, with high levels of borrowing, and...