We live in a world of mega companies and mega deals, where a small number of companies account for a big chunk of the market’s value, most of its earnings and its payouts. Numbers of listed companies are falling here and in the US, in large part as a result of acquisitions. There is nothing wrong with being big as the success of Apple, Alphabet and Amazon all testify to. And while no one can accuse this bunch of losing their way and failing to focus on their products rather than the financials, all too often that is the case with older, bigger companies where management’s focus drifts towards financials rather than products or service, and the easiest path to growth is to buy it in.
Recent research on US companies confirms that they are getting older, reflecting a lack of new companies coming through. That wouldn’t matter but evidence suggests older companies innovate less and are more rigid. US companies now have far more cash than debt – not the sign of businesses that are going places, and they are investing far less than they used to. At the same time, total payouts to US shareholders are at record levels, a statistic that underlines how companies are using their cash in an unproductive way.