M&A ‘Almost Necessary’ Now: Santoli
Recent multibillion-dollar acquisitions are putting idle corporate cash to work and make sense for the current market, Mike Santoli of Yahoo! Finance said Friday.
"I think what you've seen is a pent-up demand for deals," he said.
Recent mergers and acquisitions include:
- Berkshire Hathaway and 3G Capital Management agree to purchase Heinz for $23.3 billion.
- American Airlines and US Airways agreed to a merger that would create the world's No. 1 airline by traffic.
- Michael Dell moved to take No. 3 PC maker Dell private for in a $24.4 billion deal.
- And Comcast agreed to buy the remaining share of CNBC parent company NBC Universal from General Electric.
On "Fast Money," Santoli added that the climate was ripe for M&A activity.
"Stocks might not be cheap outright, but you can make the numbers work in the context of plentiful cash, cheap debt and all these other factors that obviously make a branded business like Heinz, or make a cash-flow business like NBC Universal, worth a lot more than the cash you had sitting there," he said. "So, I do think it makes a lot of sense.
"All the factors that are supporting the market make M&A at this stage of the cycle are almost necessary, almost a necessary component if the market is going to hold in."
Santoli called it an outgrowth of the same factors that have sent stocks higher in recent weeks, such as rising risk appetites and money being cheap.
But he also cautioned against one type of bet.
"I think that the game of trying to figure out the next potential takeover target is kind of a loser's game. You're going to have hits and misses," he said. "It's much more about sort of the general flow is heading in the direction of more transaction and therefore more companies looking to do something strategic or maybe even slim down."
Santoli stressed that acquisitions were not "magic" for the stock market but rather that they were supportive.
The rise in stock prices of companies making acquisitions, like that of Comcast and Bershire Hathaway, also provided another signal, Santoli added.
"It shows you that people didn't think they were going crazy overpaying, and it shows you that people are glad to have an asset replacing inert cash on company balance sheets," he said. "That's good until you get to the excesses, and then it gets silly. And then the stocks won't go up whenever they announce a deal."
Trader disclosure: On Feb. 15, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Jon Najarian is short puts in HLF; Jon Najarian is short puts in CSTR; Jon Najarian is short long call spreads in FRX; Jon Najarian is short long call spreads in LULU; Jon Najarian is short long call spreads in INCYPete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long JPM CALLS; Pete Najarian is long MS CALLS; Pete Najarian is long YHOO CALLS; Pete Najarian is long BBRY; Pete Najarian is long BBRY CALLS; Pete Najarian is long SBUX; Pete Najarian is long FB; Pete Najarian is long MSFT; Pete Najarian is long GE; Pete Najarian is long BX; Enis Taner is long GS; Enis Taner is long SPY PUTS; Enis Taner is long C PUT SPREAD; Enis Taner is short QCOM PUTS SPREAD; Enis Taner is long TSLA Call Calendar; Stephen Weiss has nothing to disclose.