The number of major private equity deals will slow, but the pace of smaller strategic deals will continue unabated, JP Morgan’s head of investment banking for the Americas told CNBC.
In an exclusive interview with CNBC’s David Faber, JP Morgan’s Doug Braunstein said the environment for mergers and acquisitions has “never been this good.”
“Corporations globally are engaged more than they ever have been in history in strategic transactions,” Braunstein said Tuesday. “But the character of that activity has changed. Stock has been replaced by cash as predominant form of consideration. Corporate America is in the strongest position they’ve ever been from a credit perspective. They’ve de-leveraged, cash flows and earnings are extremely strong, so they have the capacity to use that capital to buy businesses and grow.”
On the strategic front, Braunstein said he looks for strong M&A activity in the commodities sector.
“I think you’re going to continue to see real consolidation,” he said. “The ability to put businesses together and take advantage of scale and scope in terms of project development and opportunities for exploration (create) a very strong rationale for consolidation.”
Braunstein said the rising cost of capital has slowed the pace of mega deals, but stressed that the game isn’t over.
“There’s certainly been a bit of a pause,” Braunstein said. “There will be a shift of the curve, if you will, but I think our expectation is that it’s a shift of the curve – not the decline of that curve. As a practical matter, that means it’s going to be a very active environment.”