A Deal-Making Rebound Is Already in the Works

Arconic
(ARNC), a maker of aluminum products, agreed in May to be acquired altogether by affiliates of
Apollo Global Management
(APO) for $5.2 billion in cash.

The deals are a welcome sign for investment bankers who have had to endure a challenging climate consisting of an uncertain economy, higher financing costs, and a tougher regulatory climate over the past year.

But those headwinds make companies more willing to shed noncore assets, and focus on the business segments that do well. And that’s where private equity plays a major role.

“Private equity, for technical reasons, they have to invest or give back money to their limited partners, which is something they really don’t like to do, for obvious reasons,” Andrea Guerzoni, global vice chair of strategy and transactions at EY, tells Barron’s. “So I think in general, we will see an increase in deal activity.”

The acquisitions that private-equity firms have been making are add-on acquisitions to enhance their portfolio, rather than acquisitions in new industries, he adds.

Write to Carleton English at [email protected]