A report released today from Credit Suisse Research on the state of the global capital market shows the world’s biggest and most successful companies are spending more money on acquisitions than ever before, and the pace of that spending is accelerating.
The report found that over the last three years, the top five firms accounted for the bulk of global capital spending at $1,331 billion.
By contrast, the five companies on the bottom rung of the list accounted for $924 billion.
The top five accounted for 58 percent of all total capital spending in the year ending March 2019, and they accounted for 63 percent of total acquisitions by the five firms in the same period.
The study found that acquisitions by these five companies are more costly to acquire than any other.
“With the current global capital glut, this means that it is extremely difficult to get the necessary capital in a timely manner,” said Credit Suse Research CFO James Schmitz.
“While the overall growth of capital spending has slowed, acquisitions have been on a tear over the past few years, with the combined capital spend of the top and bottom five companies rising by more than $1 trillion, and nearly $1 billion per acquisition.
In addition, the average valuation of acquisitions is now at $10 billion, and while that number has been rising over the years, it is still below its peak in 2016 of $12.8 billion.”
In particular, acquisitions by companies such as Amazon, Facebook, Netflix, and Google are becoming more difficult to complete as the technology companies become more mature.
This has prompted many analysts to predict that the stock market could plunge further.
In an attempt to counteract the risk of a further slide in the stock price, Credit Suce Research has developed a new index to track the performance of the major US technology companies.
The index will track the market’s valuation of each company over the next five years.
The index will have a value of $20 billion by 2021, based on the companies’ estimated market capitalization of $2.8 trillion, with a weighted average valuation per company of $10.7 billion.
This is up from $8.2 billion a year ago.
In the US, the market capitalizations of the leading technology companies are now more than four times greater than the value of their entire market cap, which stands at $3.8 to $3,8 trillion.
In other words, the valuation of the entire US technology sector is now more valuable than the entire global technology sector.
“While the technology market is still in its infancy, this index offers an important benchmark to monitor the performance and impact of the US technology industry,” said Schmit z.
“The high level of value of technology companies over the world is clearly not sustainable in the near term, as the US market has only recently begun to catch up with global growth and the ability of companies to grow their value through acquisitions.”