Network News

X My Profile
View More Activity
2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Does recent M&A activity mean the economy's getting better?

There has been a flurry of recent mergers and acquisition activity, including today's $11.34 billion takeover of Smith International by Schlumberger, two big oil field suppliers.

Since the December, we've seen Swiss pharma Novartis buy a 77 percent stake in eye-care firm Alcon for $28 billion, Comcast buy NBC Universal for $30 billion and Kraft buy Cadbury for $19 billion.

Does this M&A activity mean the economy is better? Not necessarily, says Miller Tabak equity strategist Peter Boockvar, who writes: "While it’s great if you happen to own the stock of the acquired, a pickup in M&A activity usually follows a healthy market rather than it being a precursor to one."

Further, if you're thinking that this M&A activity gives you a chance to game the market and make some money, don't. Boockvar says you shouldn't own a stock because you think/hope the company's going to get taken over.

There's going to be M&A activity because you've got some companies that are flush with cash -- like Cisco -- and companies that are in trouble that prove to be good values. Probably, you're going to see a lot more hostile M&A activity, such as the Kraft/Cadbury shotgun marriage, until the economy improves enough that the predator-to-prey ratio comes closer to 1:1.

You can watch Boockvar, and Frank Aquila, of Sullivan & Cromwell, on CBNC today, talking about the recent M&A activity, below.

Follow me on Twitter at @theticker











By Frank Ahrens  |  February 22, 2010; 4:19 PM ET
Categories:  Corporations , The Ticker , Wall Street  | Tags: M&A, Miller Tabak, Peter Boockvar, Schlumberger  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Waxman: Documents show Toyota dismissed electronics in runaway acceleration cases, misled public about fixes
Next: Documents show NHTSA closed 2007 probe of runaway Toyota acceleration even though it knew the problem was 'dangerous'

No comments have been posted to this entry.

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company