WASHINGTON — Snapping a three-year slowdown, the corporate world's appetite for dealmaking has returned.
The volume of global mergers this year rose 19 percent, according to Dealogic, advancing for the first time since 2007 as firms looked for ways to deploy the record amount of cash sitting on their balance sheets.
But because companies often shed jobs when they combine, this renewed enthusiasm for mergers and acquisitions could spell trouble for some workers. Already, after cutting big deals this year, executives have announced thousands of job cuts or hinted that layoffs are on their way.
Conditions are ripe for a comeback in mergers and acquisitions because U.S. companies are holding a record of nearly $2 trillion in cash. They have been hesitant to use these massive piles of funds to hire as they wait to see whether the economic recovery picks up more speed. Instead, this year they've been making safer bets: buying back stocks to help boost their share prices and spending money on modestly sized mergers.
The deal market, however, is still far from its glory days before the financial crisis, when global mergers totaled $4.6 trillion in 2007. By comparison, this year deals are on track to surpass $2.7 trillion, according to Dealogic, which tracks corporate mergers and acquisitions.
Despite a lack of blockbuster mergers and acquisitions, deal volume in the United States rose more than 10 percent this year to $883 billion. Emerging markets delivered particularly strong growth, with deal volume rising 56 percent from 2009 and accounting for 32 percent of the global total — the highest share on record, according to Dealogic.
Some corporate mergers this year have been shadowed by fears of layoffs.
Shareholders of United Airlines and Continental Airlines in September approved a merger between the two companies that would form the world's biggest airline. Executives have hinted there will be job cuts when the airlines combine, but so far haven't provided any numbers.
Abbott Laboratories announced in September it would cut 3 percent of its work force, or 3,000 jobs, after its $6 billion purchase of Solvay's pharmaceuticals division closed in February. The company said it will close Solvay's former U.S. headquarters for its pharmaceuticals unit in Marietta, Ga., by the end of next year.
Yet recent surveys of corporate executives show they expect to spend more money in the new year — on both acquisitions and hiring.
The Business Roundtable said 59 percent of chief executive members surveyed in this year's fourth quarter expect higher capital spending in the next six months, compared with just 40 percent a year ago. In addition, 45 percent said they expect to increase hiring in the next six months.