Corporate America Sitting on $1 Trillion

Nine hundred forty-three billion dollars, in the form of cash and short-term investments, is burning a hole in the collective pocket of non-financial US companies, according to research from Moody's Investors Service. A significant portion of the nearly $1 trillion, dealmakers hope, will find its way into the M&A market.

Moody's suggested that companies may be "reluctant to spend on expansion and hiring," citing that demand and capacity utilization remain low in many industries. But as the economy further stabilizes, Moody's anticipates that corporations will begin to put the capital to work through share buybacks and acquisitions.

The amount of capital residing on corporate balance sheets grew by more than 21% since the end of 2008. The divide between the rich and the poor, however, is pretty substantial, as 20 companies make up 37% of the total. Cisco, Microsoft and Google, alone, account for more than $105 billion.

The bulging cash positions are leading to M&A speculation even for those who haven't historically displayed a taste for the deal. When Apple disclosed that it had $51 billion of cash in its most recent earnings statement, Steve Jobs hinted at plans to take advantage of "strategic opportunities that may come along." Observers and commentators went into overdrive speculating about potential targets. Apple, it's worth noting, isn't even in the top eight tech companies listed by Moody's, which collected data from the June and July timeframe.

According to the Moody's report, the technology, pharma, energy and consumer sectors represent the "top cash-heavy" industries, while environmental, aircraft and aerospace, and natural products are at the bottom.

Beyond M&A, the strengthening cash position of corporate America also bodes well for the so-called refinancing cliff, as the aggregate cash-to-debt ratio sat at 0.28, according to Moody's, showing a material improvement since the end of 2008.

"While we hear a lot about the looming debt refinancing cliff, receptive bond markets and generation of operating cash flow are combining to make the cliff look less intimidating for the stronger, higher-rated companies," Moody's wrote in the report.

Senior vice president Steven Oman and managing directors Tom Marshella and Mark Gray authored the report.

For reprint and licensing requests for this article, click here.