ANALYSIS-Cash-rich companies to spur M&A, boost dividends
LONDON, Nov 28 (Reuters) - Companies sitting on a global cash pile of about $4.3 trillion are set to fuel a pick-up in takeover deals and handouts to shareholders, providing a prop for equity markets in an uneven economic recovery.
Asian businesses, bolstered by the strength of their domestic economies, are likely to be most active in mergers and acquisitions (M&A) and capital spending, analysts believe.
Firms in Europe and the United States will also look for M&A deals as a quick route to boosting earnings, but are likely to hand more cash back to shareholders and focus less on capital spending against a more sluggish economic backdrop.
"We are now seeing companies raise dividends and spend on M&A, but we do see hesitancy on the capex side and we see that continuing," said Ad van Tiggelen, senior strategist at ING Investment Management in The Hague.
He predicted 2011 would be the best year for M&A deals since 2007, with dividend increases the highest for three or four years, helping to underpin equity markets.
According to Thomson Reuters data, companies outside the financial sector (where cash is often held as a regulatory requirement) are sitting on cash and short-term investments worth $1.88 trillion in Asia, $1.3 trillion in the United States and $1.17 trillion in Europe.
These figures all represent a higher proportion of companies' total assets than at any time for 20 years as firms built up a buffer against a deep economic downturn and a crippled banking system.
China Mobile <0941.HK> has amassed the biggest net cash hoard of $42.7 billion, ahead of Microsoft <MSFT.O> with $33.5 billion, Google <GOOG.O> with $31.3 billion, Apple <AAPL.O> with $25.6 billion and Cisco Systems <CSCO.O> with $23.6 billion.
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