The Week in Breakingviews

Most of the time, we assume finance is grounded in logic. Executives and investors make decisions based on some kind of financial reasoning, even if their thinking is flawed or turns out to be wrong. But often a more primal instinct is at work. Writing in 1936 , John Maynard Keynes summed up this impulse - “a spontaneous urge to action rather than inaction” - as “animal spirits”.

Animal spirits are making a comeback in private equity. The big beasts of the buyout world are once again sniffing around tasty targets. Shares in Rentokil surged this week following reports former BT boss Philip Jansen is keen to take the $17 billion rat-catching firm private. L Catterton has approached Barbie maker Mattel . Private equity firms are also sizing up offers for Unilever’s ice cream unit and Sanofi’s consumer drugs business, both worth around $20 billion. There’s some logic to the revival: borrowing costs have stabilised and issuance of European collateralised loan obligations - a key source of buyout debt - has doubled this year. But there’s also a fear of missing out.

Countering this urge is the recognition that negotiating a price is no guarantee of collecting the keys. Eager executives must win over uppity shareholders, meddling politicians and sceptical competition authorities. This last group may have scuttled Google owner Alphabet’s pursuit of Wiz , though the Israeli cybersecurity firm may also have been emboldened by its unfortunate rival Crowdstrike becoming the newest member of the corporate klutz club . Either way, deals are harder to do. Though the value of mergers announced is up this year, the value of completed deals is slightly down. No wonder investment bankers are pushing to get paid for their advice even if deals are subsequently blocked .

One part of the world that could use an injection of animal spirits is China. The combination of non-existent inflation, record bank deposits, and stagnant lending prompted us to ponder whether the People’s Republic is falling into a liquidity trap . It’s another Keynesian concept, though the great economist never used the term. The prescription is clear, however. If animal spirits are subdued, it’s up to the authorities to poke them back into life.

Five things I learned from Breakingviews this week:

1. China’s money supply , using a broad measure, is larger than in the United States and Europe combined.
2. Only 10 presidents in U.S. history have failed to win re-election .
3. Of the $13 billion that overseas investors pumped into Chinese equities in the year to May, 80% has flowed back out.
4. Tesla’s gross margin on automobiles has halved since 2022.
5. The Paris Olympics are the cheapest summer games since Beijing in 2008.