In a new report, analysts at Credit Suisse discuss the building merger and acquisition wave and the best way for traders to profit from future deals. The report includes a group of 11 U.S.-listed stocks that Credit Suisse sees as potential buyout targets.
Will The Wave Continue?
Analysts discuss four reasons why the M&A wave is set to grow in coming months.
- According to the report, 73 percent of European companies and 63 percent of U.S. companies have a free cash flow (FCF) yield greater than their respective corporate bond yield.
- Corporate confidence levels are consistent with well above-average levels of M&A, yet activity levels are slightly below their long-term average.
- When many potential buyout targets cost less than replacement value, it becomes economically prudent to buy rather than build.
- Private equity buyers are seemingly willing to pay higher multiples than strategic buyers.
Disruptive Technology
Analysts specifically mention the smartphone revolution as a potential driver for M&A activity. According to the report, 2017 global smartphone penetration rates are expected to reach 56 percent.
As every company is forced to adopt an Internet/mobile strategy, business models will be subject to dramatic change. “The result of this, in our view, is that companies may have to adapt very quickly, and it is often quicker to buy than grow organically,” analysts explain.
Buyout Targets
Credit Suisse lists the following 11 stocks as potential U.S.-listed buyout targets:
Lam Research Corporation LRCX 1.05%
F5 Networks, Inc. FFIV 1.4%
Broadcom Corporation BRCM 0.44%
NetApp Inc. NTAP 1.49%
HollyFrontier Corp HFC 2.34%
Take-Two Interactive Software, Inc. TTWO 2.83%
National Oilwell Varco, Inc. NOV 2.82%
FMC Technologies, Inc. FTI 3.86%
Myriad Genetics, Inc. MYGN 1.49%
Western Digital Corp WDC 1.99%
Fossil Group Inc FOSL 0.26%
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