Tags: M&A | frenzy | positive | stocks

Money Manager Baker: M&A Frenzy Positive for Stocks

By    |   Sunday, 27 April 2014 02:24 PM

The recent onslaught in merger and acquisition activity is bullish for the stock market, says Simon Baker, founder of Baker Avenue Asset Management.

Medical device maker Zimmer Holdings recently agreed to acquire rival Biomet for $13.35 billion, and General Electric is reportedly in talks to buy French industrial powerhouse Alstom's energy operations.

"I think it's good for the market," Baker told Yahoo. "What typically happens is you see a lot more of these deals as other companies feel the need to do deals. It’s sort of self-fulfilling at the end of the day."

Editor's Note: These 38 Dates Are Key to Bagging $313,038

One factor spurring the mergers is the low cost of capital. There is $1.9 trillion of cash sitting on corporate balance sheets, he said.

"You've got the Ackmans of the world coming in," Baker said. He was referring to Bill Ackman, CEO of hedge fund manager Pershing Square Capital Management. Pershing is part of the deal for pharmaceutical company Valeant to buy Botox maker Allergan.

One important factor is that companies are making their acquisitions with cash, not stock, Baker said. "That's saying they're confident about the underlying economy, which is positive for the overall market."

Two major beneficiaries of the merger mania are Goldman Sachs and Morgan Stanley, which have big M&A advisory and securities-underwriting businesses. Both garnered hefty revenue from that activity in the first quarter, The Wall Street Journal reports.

Goldman's investment-banking revenue climbed 13 percent in the period, with a 41 percent surge in advisory fees. Morgan Stanley saw investment-banking revenue advance 20 percent, with advisory revenue up 34 percent.

Editor's Note: These 38 Dates Are Key to Bagging $313,038

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The recent onslaught in merger and acquisition activity is bullish for the stock market, says Simon Baker, founder of Baker Avenue Asset Management.
M&A, frenzy, positive, stocks
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2014-24-27
Sunday, 27 April 2014 02:24 PM
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