Getting in On The Global M&A Game

Global CEOs are suddenly very busy buying one another's companies. Global merger volume already totals $1.3 trillion this year, an increase of 70 percent compared to the same period in 2013.

We typically think of targeted companies as the primary beneficiaries of buying activity, especially since deal premiums have averaged nearly 25 percent this year. In fact, this is only half the story.

The team at Strategas Research Partners compared the stock performance of acquiring companies following deal announcements, and determined that they too outperform the broader market.


The data argues for buying the buyers, and portfolio manger Howard Ward of GAMCO agrees. He explained on Surveillance that CEOs are generally pursuing accretive deals, meaning acquisitions which add to earnings. In addition, he says CEOs are strategically using overseas cash to avoid repatriation at higher tax rates. These are significant positives, and help to explain acquirer outperformance.


As for specific acquirers investors may want to consider buying, four deals have surfaced in the last several days. While Forest Laboratories' (FRX ) bid for Furiex Pharmaceuticals (FURX ) is the only accepted offer , plenty of moving parts are creating opportunities for investors. The other three:

-General Electric Co. (GE ) wooing French President Hollande as well as its target Alstom SA

-Pfizer Inc. (PFE ) insisting (again) that it wants to buy the UK's AstraZenca PLC (AZN )

-As yet unconfirmed reports by the Financial Times surrounding NorthStar Realty Finance Corp. (NRF )


Again, only one of these deals is official, but already the stocks of GE and Pfizer have risen about three percent on the mere possibility of deals. The stock of the company said to be looking at NorthStar Realty Finance Corp., American Realty Capital Properties Inc. (ARCP ), was down about 2.5 percent as of midday.

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