M&A continues

All sectors was in a red territory yesterday, but only one of them was up. The biggest loser was energy and the winner was the heath care sector. So far in 2014, the biggest loser is the energy sector, while the health care sector is the winner. This is just what I expected it to be in 2014. Read my article titled; health-care bull, dated January 8, 2014.

The takeover boom is not over yet, and 2014 will be the best in many years. Lawyers working with advice on takeovers say they`ve got a robust pipeline of deals in the works. Some of their works is delayed, so December will be busier than usual.

Health care stocks soared in 2014 and next year is shaping up to be another great year for these stocks.

The shares of Cubist Pharmaceuticals Inc rose 35% yesterday, and the reason is that pharmaceutical giant Merck (MRK) want to acquire its smaller peer for $102 per share. Included the debt, the deal is valued at $8,4 billion. This deal will strengthen Merck`s leadership position in the hospital acute care market.

Two of Cubist Pharmaceutical`s three commercial products focus on treating difficult-to-fight infections, and the firm`s reputation has become a «superbug» specialist in a business that has overlooked such infections until fairly recently.

The deal will be financed primarily by the issuance of about $9,5 billion in new debt, and Merck expect the deal to add about $1 billion in annual revenue. Cubist Pharmaceutical`s drugs should become significantly accretive to Merck`s EPS from 2016.

I wrote about M&A activity last year. Read my article titled M&A (merger and acquisition), December 13, 2013. First of all; it is very lucrative for companies to buy now when the interest rates are historically low, and I think this will continue until the Fed makes a jump on the interest rate.

If you look at 2013, the S&P 500 was up about 30%, and that was a good sign of a healthy stock market. Credit markets was also good with higher leverage levels. About 18,000 Private Equity Firms were also looking for liquidity given strong prevailing market conditions, in addition to increased corporate cash and finite-lived private equity capital reserves. All this factors have led to high degree of M&A activity in 2014, but what about 2015?

Predicting the future is risky business, but what are you gonna do if you don`t belive in something?

By tracking global sell-side mandates and deals reaching the due-dilligence phase of a transaction, it is possible to forecast future deal levels. If you look at the deal volume reported by Thomson Reuters, you can indicate future changes in the numbers of announced M&A transactions.

The latest Q3 data this year will forecast Q1 2015, and that suggests sustained momentum in M&A activity through 2015. Deal volume is expected to go up, and hot sectors will be entertainment, media, consumer, manufacturing and telecommunication. The most active sectors are expected to be energy and technology.

A forecast is based on facts today, but as you may know everything can change tomorrow. A change in macroeconomic or political conditions or even a change in the financial markets will change the whole picture and that can happen overnight.


Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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