A Stable Platform?
Conglomerate_Boom
Conglomerate_Boom
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The 1960s Conglomerate Boom<br />
A major boom in conglomerate formation occurred in the 1960s driven by low interest rates, muted economic growth and investors’<br />
focus on earnings growth.<br />
LOW AND STABLE<br />
INFLATION AND<br />
INTEREST RATES<br />
MUTED ECONOMIC<br />
GROWTH<br />
INVESTORS’<br />
APPETITE FOR<br />
EARNINGS GROWTH<br />
Low interest rates depressed the<br />
cost of capital and encouraged<br />
investors to move into riskier<br />
assets<br />
A slowdown in growth in 1967<br />
fueled M&A activity and inflated<br />
the conglomerate bubble<br />
“Go-Go” fund managers or<br />
“gunslingers” focused on<br />
earnings growth independent of<br />
how it was generated, and<br />
developed an affinity for<br />
conglomerate stocks<br />
With a low cost of equity capital, high perceived corporate synergies and limited growth opportunities,<br />
investors paid ever-increasing multiples for acquisition-led growth.<br />
Strictly confidential. Not for public distribution. © 2015 JHL Capital Group LLC. All rights reserved. 4
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