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Santoli: For CEOs and bankers, it's now or never

Merge and Acquisition
Martin Barraud | Getty Images

The opening chords to "It's Now or Never" seem to be playing in many corporate boardrooms lately.

Dealmaking has been part of the choreography of the past few years of this bull market, energizing stocks whenever the capital markets have been remotely stable.

After the August-September gut check in equities and riskier bonds, cheap debt remains plentiful and corporate growth imperatives are driving a buy-rather-than-build impulse as profit margins slip.

Meantime, even if U.S. interest rates don't go up much, as many have wrongly expected for a while, it's likely the most generous financing conditions of this cycle are past. It's all adding a sense of urgency to companies' interest in finding targets or partners.

Since last week, we've seen plenty of evidence that the acquisitive and financial-engineering appetites remain strong, with MGM Resorts (MGM) pursuing a conversion of some casinos into a real estate investment trust and chatter of Pfizer (PFE) approaching Allergan (AGN). Tens of billions in debt are being raised to fund the purchase of EMC (EMC) by Dell.

Some of this activity falls under the buzz phrase "fit and focus," such as ConAgra's (CAG) sale of its private-label brands to Treehouse Foods (THS). Then there's the global expansionist strategies, such as Visa's (V) planned purchase of Visa Europe and Anheuser-Busch InBev's (BUD) merger with SABMiller (SAB.L).

This is standard behavior several years into a bull market and while not a reason alone to expect higher index levels it tends to be market-positive until it gets to some extreme point with overaggressive deals conjured at value-destroying prices. In particular, the sale of debt to buy or retire equity is like a cheap, global and largely rational margin loan supporting equities.

At minimum, it could give pause to traders leaning heavily on shorts in busted sectors.

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