Lost amid the shuffle of the seemingly unstoppable stock market has been a slowdown in corporate mergers. The pace of M&A activity weakened in the fourth quarter of 2017, while full-year deal volume lagged what was seen in 2016, according to Morgan Stanley. The firm notes that this happened despite strong global economic growth and high cash balances, which should theoretically embolden corporations to be active. And it's an unfortunate development, considering the consolidation of companies has long been a boon for the market and a signal of strength. But fear not, says Morgan Stanley, because a recovery is on the way — all thanks to tax reform. The firm argues that both the newly-passed tax cuts and repatriation holiday will give companies even more cash to work with. It also thinks that the plan's completion will ease anxiety that had mounted around tax policy, allowing corporations to proceed without worry. Morgan Stanley also notes that a measure of US M&A offer intensity has slipped below its average historical level, on a rolling 12-month basis, suggesting that a rebound could be in store. This can be seen in the chart below. "A major source of uncertainty has been tax policy, and the recently passed legislation may provide the clarity that companies need to re-engage in M&A activity," Brian Hayes, a quantitative analyst at Morgan Stanley, wrote in a client note. But Morgan Stanley isn't alone. Here's a rundown of comments made by other Wall Street firms in recent weeks: Despite all of this unabashed M&A bullishness, Morgan Stanley does note one element that could give investors pause. According to the firm's data, companies engaging in M&A activity haven't seen their stock prices rewarded by investors in recent months. Still, that's just what's happened to the median company, and there are situations where acquirers have received a stock boost. Ultimately, what should be most important to companies is not doing M&A just for the sake of it, but instead identifying targets that can enrich their business. And now that they're sitting on a veritable mountain of cash, it's going to get interesting.
Israel Chemicals is among five continental European companies most likely to receive tenders offers this year as M&A activity picks up, according to Morgan Stanley. The Israeli company has been in the spotlight for its role in a chemical weapons attack on August 21, 2013, which killed hundreds of people and injured thousands more.