Macq-ro insights:The corporate savings “glut”&cross-border M&A

The corporate saving “glut” (*) refers to what appear to be structural savings-investment surpluses in many advanced economy corporate sectors (Fig 4 & Fig 5). One of the earliest and now biggest is Japan’s corporate sector, which is recycling it overseas through record overseas M&A.

A detailed break-out of Japanese data back to 1994, Fig 3, strongly suggests that the corporate savings surplus is a by-product of falling nominal interest rates first and only secondly diminished domestic investment opportunities at home.

These conditions are now prevalent across advanced economies: Global cross-border M&A in 2015 was 40% above its previous high of 2007, below. We expect intense cross-border M&A in 2016 and beyond.