April 28 - The latest merger and acquisition trend is being fueled by corporations finally willing to part with cash savings, attempts to get ahead of expected higher interest rates, and bets on an improving European economy. Lily Jamali reports.
PLEASE NOTE: THIS EDIT CONTAINS CONVERTED 4:3 MATERIAL The M&A machine keeps churning out new deals. On Monday Big Pharma led the way, with Pfizer announcing a $100 billion bid for foreign drugmaker AstraZeneca. And Forest Laboratories announced it was buying Furiex Pharmaceuticals for about $1.5 billion. With $150 billion in possible mergers announced Monday alone, Assistant Professor Moshe Cohen of Columbia Business School says dealmaking may finally be catching up with the bull market: SOUNDBITE: MOSHE COHEN, ASSISTANT PROFESSOR OF FINANCE AND ECONOMICS, COLUMBIA BUSINESS SCHOOL (ENGLISH) SAYING: "M & A activity really has not picked up as much as the markets so you're seeing both opportunity for deals and deals that have probably been planned for a very long time now becoming more advantageous." Cohen says the current boom is marked by fewer - but larger - deals than in the recent past. And another unique feature: in a number of cases the share prices of both parties to a merger are rising, like in the case of Pfizer and AstraZeneca. SOUNDBITE: MOSHE COHEN, ASSISTANT PROFESSOR OF FINANCE AND ECONOMICS, COLUMBIA BUSINESS SCHOOL (ENGLISH) SAYING: "It's consistent with the deals being done a little more carefully. Even though they're large, and potentially being mutually beneficial for both the acquirer and the target." As the Fed tightens monetary policy, the prospect of an interest rate increase on the horizon is a big part of the recent surge in deal making, says Thomas Burnett, Vice Chairman and Director of Research at Wall Street Access: SOUNDBITE: THOMAS BURNETT, DIRECTOR OF RESEARCH/VICE CHAIRMAN, WALL STREET ACCESS (ENGLISH) SAYING: "Everyone knows rates are going up. We don't know when but it's likely to be happening in the next 18 months so you want to make sure you're in line and through the revolving door before the music stops." Burnett says another deal driver has been a brighter outlook on Europe. He adds that many sectors are likely to see consolidation ahead, including tech, mining and energy: SOUNDBITE: THOMAS BURNETT, DIRECTOR OF RESEARCH/VICE CHAIRMAN, WALL STREET ACCESS (ENGLISH) SAYING: "We think that natural gas sector is going to be rife with deals because junior and midlevel producing companies went out and borrowed to buy acreage in reserves and prices went down and they got stuck. Now the prices are back up and they're looking for rescue. We think there's going to be a lot of M&A activity in that space." Not so much in the financial sector - says Burnett - which he thinks is still mired in regulatory issues for the time being.