Mergers and Acquisitions from A to Z by Andrew J. Sherman

Author:Andrew J. Sherman [Sherman, Andrew J.]
Language: eng
Format: epub, pdf
Published: 2018-04-14T16:00:00+00:00

FINANCING DEALS IN TIMES OF TURMOIL

A U.S. economic contraction rooted in the housing and financial sectors spread worldwide, and interconnected global commerce and financial markets sank in unison. Losses spread from subprime mortgages to other widely held financial instruments, of which banks and investment funds had used leverage to purchase large quantities. In the most extreme cases, several of the nation’s largest financial institutions collapsed as their ability to borrow short-term to fund their long-term investments vanished. The failure of the Fed’s monetary easing and the Treasury’s financial support to immediately facilitate lending and bail out ailing financial institutions led to a frenzied panic that resulted in this striking credit crisis and the ensuing recession being insurmountable. Lack of confidence in investment banks’ abilities to continue funding operations in the short-term debt markets uprooted their business model and led to their extinction. Uncertainty about the extent and location of losses caused banks to tighten lending standards, increasing the cost of financing for corporate America and exacerbating an economic slowdown that was already under way. A move toward stringent lending conditions and more conservative investment criteria triggered a wave of de-leveraging worldwide that continued well into 2010.

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