Win Win

A commentator on TV mentioned something that made me think the other day. She said that for the first time in her memory, when mergers are being announced, the stocks of both companies are going up substantially.  Historically, the buyer stock goes down and the company being acquired goes up. The thought is the purchaser may have over paid, integration risk etc.

Why the change? Is it because companies have so much cash, or debt is so cheap that investors are cheering acquisitions from both sides? Is it because companies are still cheap to buy? Is it because the stock market has gotten complacent? Is it because tax laws are so convoluted that deals really can be win win due to tax savings?

I do not really know the answer, but boards of directors have to be noticing the shift. And if you will not be put in the penalty box for an acquisition, that may rally light a fire under m&a.

Speaking of M&A, the bid for AGN with a combo of an activist (Ackman) and an serial acquirer (VRX) is certainly a new twist.  Even Carl Icahn is grudgingly admitting it seems smart.

If these are the new trends, we could certainly have another leg up in this bull market. And it could bode well for inexpensive, but alluring MFI stocks. Stay tuned.