Historically, you can tell when America is in recession because corporations dedicate their resources towards mergers and acquisitions rather than towards growth and expansion. And since the height of the Dot Com bubble in the late 1990’s, the number of publicly listed companies on U.S. exchanges has fallen from just under 8,800, to just over 5,000 as of 2014.
And these numbers should only get even more constricted with plans to merge Dow and Dupont, Monsanto and Bayer, and Berkshire-Hathaway’s move to takeover Yahoo.
But for the most part, mergers between corporations rarely succeed in long-term growth of a company’s bottom line. When you take a look at acquisitions done previously by Time-Warner, in the purchases of AOL and MySpace, neither takeover resulted in greater earnings and in fact, led to losses that eventually required them both to be dumped at pennies on the dollar.
However, when acquisitions are done at the sovereign level, the outcome can often be extraordinary. And this is exactly what is occurring for both Russia and China as they seek the acquisitions of expanded partnerships between themselves, and in opportunities arising out of declining economies.
Russia seeks to be a part of Saudi Arabia’s planned Sovereign Wealth Fund project
Earlier this year, the Saudi Kingdom announced they were underway with plans to divest much of their oil holdings and create a new trillion dollar Sovereign Wealth Fund that would focus on creating value in industries outside of their own current ones. And speaking from the Russia-Asean summit that took place on May 19-20, Russian energy minister Alexander Novak announced that they were very interested in being a part of the Kingdom’s new initiative.
Yet this announcement was not the only project the leaders of the Eurasian Economic Union (EEU) were working towards with their colleagues at the conference. A proposal for merging several aspects of their and the Asean trade partnerships was put on the table by none other than President Vladimir Putin, and a coalition on this scale could instantly make the two trade unions the 4th largest economy in the world, rivaled only by the U.S., Japan, and the European Union.
One of the biggest differences occurring between the West and the East appear to be that of expansion versus decline, and growth versus consolidation in their respective economies. And those who have been dominant on the world stage for the past four decades like Saudi Arabia, the European Union, and corporations on Wall Street, are suddenly finding themselves struggling for a seat at the table in a world that is crying for real economic growth, through the acquisition of expanded trade agreements rather than through the acquisition of one’s competitors.