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The cash paradox
Our Deloitte M&A Perspectives are a series of short articles where we share our views on topical M&A market themes and trends.
Market commentators often cite record corporate cash reserves as the key driver to rekindle M&A volumes yet deal making has remain subdued.
Our M&A insight team have examined this paradox by analysing the FTSE 100 non-financial companies and their historical spending patterns. What emerges is a complex picture of ‘have’s’ and ‘have not’s’ who are exhibiting markedly different attitudes toward cash.
We observed the companies with the largest cash reserves display a fiscally conservative attitude towards cash, despite their position of strength. On the other hand, the ones with relatively small cash reserves are more bullish in the pursuit of growth and aggressively seek M&A opportunities. It seems such companies not only generate higher revenue growth but are also are rewarded by the markets through enhanced share price.