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.
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February 22, 2010; 4:19 PM ET
Categories: Corporations , The Ticker , Wall Street | Tags: M&A, Miller Tabak, Peter Boockvar, Schlumberger
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