However, with high interest rates, the cost of borrowing increases, and so does that of funding acquisitions.
More often than not, it would then be slow M&A activity-since the margins on deals need to be higher to offset the increased financing cost. As the interest rates rise, the value of the target companies falls with it. This is because high discount rates reduce the present values of future cash flows. In this case, the prices offered by the acquirers become lower. 2. Leveraged Buyouts (LBOs)
However, with high interest rates, the cost of borrowing increases, and so does that of funding acquisitions.
More often than not, it would then be slow M&A activity-since the margins on deals need to be higher to offset the increased financing cost. As the interest rates rise, the value of the target companies falls with it. This is because high discount rates reduce the present values of future cash flows. In this case, the prices offered by the acquirers become lower. 2. Leveraged Buyouts (LBOs)