With so much talk about M&A these days, it's worth analyzing the conditions that are fostering this situation. It's not an easy question, since current market conditions aren't that different than they were a year ago, when there were a lot fewer deals. The Wall Street Journal tries to suss out a few reasons, including the continuing low interest rate environment (although they were lower a year ago), and a lack of regulatory obstructions -- there's a widespread sense that the DOJ has been rendered powerless to stop mergers ever since it failed to block Oracle's purchase of PeopleSoft. Still, these reasons don't seem robust enough to fully explain the spate of real or imagined dealmaking. The simplest answer may come from looking at the stock market. Take a look at what happened last Friday when rumor spread that Microsoft might buy Yahoo. While Yahoo's stock surged, Microsoft's stock barely dipped. In normal market conditions, you'd expect the announcement of a very risky, desperate-looking $50 billion acquisition to hit the acquiring company hard. The fact that it didn't suggests an unusually high amount of optimism. The fact that markets around the world are all pushing new records confirms that optimism is indeed widespread. So perhaps all of these deals aren't reflective of any significant economic shifts, but rather a lot of confidence than any investment, no matter how risky, will ultimately work out.
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