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Expect M&A's to Rise in These Sectors: Expert
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CNBC.com Writer
M&A activities have been on the rise in recent weeks, so where are the likely sectors that investors should focus on? Peter Boockvar, equity strategist at Miller Tabak and Frank Aquila, partner at Sullivan & Cromwell shared their insights.
“Whether it’s Greek debt concerns, political stalemate uncertainly, questions about whether the recovery will be robust, there’s a lot of reasons why companies are going slow,” Aquila told CNBC. “But the reality is, most companies are looking at the same sort of market that Schlumberger was looking at and saying this really is an opportune time to make a significant acquisition and continue with your corporate strategy.”
However, Aquila warned that there will be more hostile bids in the near-term.
“There are a lot of companies that are flushed with cash, they want to do deals and targets that feel that they are 20 percent below their historic highs so they are not as interested in doing a deal,” he explained. “So that’s the right territory for a lot of unsolicited bids.”
Judging by the market moves over the last year, Aquila said investors can expect more M&A activity going forward.
“And M&A does tend to pick up an entire sector when there’s a deal,” he said. “I think energy services, basic materials—those are going to consolidate, and consumer products is also right for consolidation.”
In the meantime, Boockvar warned that M&A follows a healthy market and economy, rather than being a precursor to one.
“Investors should not be chasing the general market because they are expecting a big pick up in M&A,” he advised. “Don’t own stocks because it will one day get taken over—own it for the fundamentals with the takeover being the icing on the cake.”
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Bank of America [BAC
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Toyota [TM
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Schlumberger [SLB
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Smith International [SII
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Genzyme [GENZ
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Disclosures:
No immediate information was available for Aquila or Boockvar.
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