Money’s gotta move—it’s the backbone of our economy, and the speed at which it zips around, known as the turnover or circulation rate, tells us a lot. It’s all about how often a dollar is spent in a certain timeframe. When times are good, money flows like a river—transactions aplenty. But in rougher waters, that river slows to a trickle as folks hold tight to their wallets. Lately, after a sluggish spell, we’re seeing that flow pick up speed again.
John Maynard Keynes was onto something when he talked about “animal spirits”—the idea that our financial decisions aren’t just cold, calculated moves. No, there’s a whole lot of gut feeling and emotion tangled up in there. And when it comes to money, those instincts can lead us to act in ways that defy pure logic.
The Fisher Equation lays it out for us: a quicker circulation of money can mean more inflation, sure, but it can also drive economic growth. That uptick in money movement? It’s a sign of renewed optimism, shaking off the doom and gloom that settled in after the Great Financial Crisis. It feels like we’re at the cusp of something big, reminiscent of the internet’s boom in the late ’90s or even the explosive growth of the Roaring Twenties. AI’s advances are likely a big part of this newfound hope.
This optimism isn’t just theoretical—it’s showing up in the real world, with mergers and acquisitions doubling in the first quarter alone. Big deals are making a comeback, signaling a shift from survival mode to growth mode, fueled by anticipation of interest rate cuts.
Europe’s bouncing back
But this isn’t just a U.S. show; Europe’s bouncing back, too, though Asia’s playing catch-up. And with private equity sitting on a mountain of cash, the pressure’s on to make those investments count. The scene is set for a flurry of deals in 2024, driven by a blend of economic confidence, a retreat from inflation fears, and a reservoir of deals waiting to burst forth.
Companies aren’t just merging for the sake of it; they’re strategically aligning to harness efficiencies, expand their domains, or acquire cutting-edge capabilities like AI. This strategic dance is leading to a vibrant marketplace, ripe with opportunities for acquisitions, especially among the over 1,200 unicorns in private equity’s stable.
Regulatory pressures and the quest for efficiency are reshaping industries across the board, from pharmaceuticals to tech, signaling a wave of consolidation. And let’s not forget the international arena, where Europe and Japan are poised to make significant moves, not just playing follow-the-leader with the U.S. but carving out their own paths toward productivity and efficiency.
At the heart of it, mergers and acquisitions are a testament to the market’s vitality and the tangible value unlocked during these transactions—a reminder that in the world of finance, movement is everything. Once the “animal spirits” stir the pot, igniting a flurry of transactions, there’s no quick way to dial it back. Money’s gotta keep rolling, after all.
Han Dieperink, with his extensive background in investment strategy at Auréus Asset Management and prior roles at Rabobank and Schretlen & Co., knows the rhythm of the market well. His insights not only illuminate the current state of play but also hint at the vibrant economic dynamics shaping our future.