Mergers indicate market optimism
ADRIENE HILL: Assuming the deal does pass regulators muster — what are the broader implications for the economy? For that we turn to Julia Coronado, chief economist at the investment bank BNP Paribas. She joins us now live. Good morning Julia.
JULIA CORONADO: Good morning.
HILL: So what do big mergers like this tell us about the health of the economy?
CORONADO: Well, usually, when mergers and acquisitions pick up, that’s a good sign that businesses are feeling confident enough about the future that they’re willing to become aggressive, look for deals, look for ways to grow and expand their operations. And it’s also an indication that markets are willing to finance these transactions. So it’s optimism from the markets and from the businesses themselves.
HILL: But when I hear about streamlining as we have in this case, I think lay offs. Do big mergers always lead to layoffs? And doesn’t that hurt the economy?
CORONADO: In general, yes mergers are often associated with layoffs. There is some overlap in operations that can be trimmed as the result of a merger. In fact that’s one of the ways the merger creates value. So in and of itself, the merger is not job friendly. To the extend however that it serves as a signal for the broader economy, that activity is picking up and that businesses are becoming more confident it can be, not always, but it can be associated with a pick up in job growth.
HILL: Great, so do you expect we’ll see more consolidation in the telecommunications industry going forward?
CORONADO: Well, yeah, I mean I would say bottom line probably so. This is an industry that is in tensely competitive, even though spending — consumer spending in this area is very strong. Consumers are very picky, very cost conscious, and so again, it’s an intense competitive industry, which usually does lead to some merger and acquisition activity.
HILL: Thanks Julia. Julia Coronado is the chief economist at the investment bank BNP Paribas.
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