According to Bloomberg M&A is about to explode. They say, “the bear market in the U.S. will provoke more hostile or unsolicited takeover bids.”
And Frank Aquila, a widely respected authority on M&A and partner with the law firm of Sullivan & Cromwell tells Fast Money, “expect to see an increase in hostile offers in sectors hit hardest by recession.”
Those sectors include retail, real estate, homebuilders and travel & leisure. “The reason these areas are going to see a lot of activity is that their share prices have fallen dramatically,” he explains.
In other words cheap stock prices could trigger a slew of hostile takeovers as bigger companies gobble up their rivals for cheap.
However the only companies that can initiative an acquisition are the ones with a lot cash on the balance sheets. That’s because “it’s very hard to get credit,” Aqulia says.
If you're looking for a trade here, be careful. Usually takeover talk boosts shares of the company about to be acquired. The thought is the aggressor will pay some kind of premium. But that might not be the case this time. According to Acquila, “expect bids that are substantially lower than the 52-week trailing average.”
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Trader disclosure: On Nov. 14, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Macke Is Short (TM); Macke Owns (MSFT), (UUP), (MGM), (WMT), (MCD); Finerman's Firm Owns (MSFT); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (USO), (BBT), (GNK), (COF); Seymour Owns (AAPL), (BAC), (EEM), (F), (FXI)