CEOs losing M&A battle to private equity: analyst

NEW YORK (Reuters) - U.S. companies are losing out to private equity on takeover opportunities because chief executives aren't getting paid to take risks as they were in the past, Morgan Stanley's chief U.S. credit strategist said on Monday.

A credit meltdown in 2002 is still fresh in management's memory and weighs on their willingness to take on debt and battle private equity firms in merger opportunities, Morgan Stanley's Greg Peters said at the Reuters Investment Outlook Summit in New York.

The result has been cash levels at U.S. companies that are so high they resemble traditional European corporate levels, he said.

"It tells you they're holding on to cash for a different reason other than just investment," Peters said, who is also head of global fixed-income research.

"What I hear time and time again is the incentive structure is different. No longer are CEOs paid in stock options and what not. So the willingness to lever up the balance sheet for the spectacular return and spectacular wealth just isn't there like it was historically."

Companies are constantly approached by investment banks with plans on what to do with their cash hordes, he said. But their answer has been to buy back stock and avoid a deal that is potentially more lucrative, yet more difficult and risky.

"The incentive structure in corporate America has changed pretty dramatically," Peters said. "They're much more apt to run a cautious business and have the compensation remain in an annuity."