Buying at the top? M&A warning signs emerge amid deal glut

The increased use of company shares to finance M&A activity may be a warning sign for investors that valuations are topping out, leading fund managers have said.

Global M&A activity has topped $1.2trn so far this year, according to data provider Dealogic. This represents the highest level since 2001, but the changing shape of deal-making has given pause for thought. Data from Dealogic shows all-cash deals make up 47% of total M&A in 2014 so far, the lowest level since 2001. In its place has come an increased amount of deals either fully or partially funded using the acquirer’s stock. “Companies are using the currency of overvalued stocks to buy assets [such as technology],” said Ian Lance, co-manager of RWC’s Enhanced Income and Global Enhance...