I keep going back to this Reality..
There is a lot of Money/Cash/Value etc being created in
this current environment...That combined with the state of flux of the American Auto industry..Tons of American companies Life blood is tied to the health of US Auto Market..ETN's certainly, Ford's quite obviously..probably even Impact Engineerings- Where is the convergence between Needs/ Cash/ "Break out opportunities" .. There is money out there...This from MSN...
Investment banks benefit most from M&A mania
5 BIGGEST INVESTMENT BANKS
The nation's five largest investment banking companies, ranked by size
Goldman Sachs, GS
Morgan Stanley,
Merrill Lynch, MER
Lehman Bros., LEH
Bear Stearns, BSC
If you happen to see a bunch of guys in suits at your child's lemonade stand, tell your kid to give them an extra-big glass. They might be private equity investors, and they might give Junior a juicy offer.
Merger-and-acquisition mania has hit Wall Street, and for good reason. Take a world awash in cash, stir in low inflation and low interest rates, and you'll get some sweet deals — at least for those with a financial interest in them.
Like all manias, M&A madness will probably leave many people with a bad taste in their mouths. Nevertheless, the urge to merge could last for a long time yet. If you want a slice of some of the money being made in M&A, consider investing in the stock of an investment bank. They make money even if the deals they help engineer eventually turn sour.
The main ingredient for an M&A boom is cash — or liquidity, in Wall Street parlance. (Liquid assets are those that can be converted to cash quickly, such as Treasury bills or bank accounts.)
Where's all this money coming from? A big chunk of it is in corporate coffers. There's $655 billion in cash on the balance sheets of companies in the Standard & Poor's 500-stock index. Microsoft alone has $25.5 billion in cash. Cisco has $22.3 billion.
Shareholders don't like to see too much cash sitting idle. The best use for cash is to reinvest in the business, and that's generally not happening now. "Corporations are not putting money back into the business," says Michael Lipper, president of Lipper Advisory Services.
Dividends and stock buybacks are two other common uses for cash, and here companies have been a bit more generous. According to Standard & Poor's, 148 companies have raised their dividends this year. And companies bought back an estimated $110 billion of their own stock in the first three months of this year, the highest level since the second quarter of 2006.
Sooner or later, companies will be tempted to buy another company. And that huge stash of corporate cash is a good reason to think that the M&A boom still has legs. "There's a ton of money sloshing around," says Alec Young, S&P's international equity strategist.
All that liquidity has unleashed a tidal wave of M&A activity. Companies have announced $1.9 trillion in new deals this year through last Friday, up 67% from the same period last year. "We think it's going to continue," Young says.
The best way to make money on an M&A deal is to own stock of a company that is being bought out.
Finding the next takeover target is a skill that few claim and even fewer possess. Sure, you can buy beaten-up stocks in hopes that someone will buy you out. But you could end up holding an ugly portfolio of unloved stocks for a long time before you hit a winner.
And owning the company that makes a big purchase is often a bad idea. When a big deal is announced, the stock of the buyer usually falls, because buyers frequently overpay, and corporate mergers often fizzle. Think Daimler. Think Chrysler. Think DaimlerChrysler.
What about private equity pools? These investors buy public and private companies in hopes of selling them for a profit later.
In most cases, you have to be very wealthy to nab a piece of the private equity action. And at this point, you might not want to. One reason: Several private equity companies, such as Fortress Investment Group, are going public.
These companies are selling chunks of their business, but probably not because they feel the public deserves a piece of the action. They may well have concluded that the best times are past. "These guys aren't dumb," Lipper says.
But 80% of M&A activity is public, despite all the press that private equity firms get. The biggest beneficiaries of all that M&A activity are the investment banks that arrange the transactions.
Profits at the big investment banks have been soaring: Net income at Goldman Sachs has rocketed 56% in the past 12 months. The stock sells at 10.7 times its estimated 2008 earnings, which is cheap, even considering that financial stocks often sell for lower price-to-earnings multiples than the broader market. (The P-E ratio — price divided by estimated earnings per share — is a measure of how expensive a stock is, relative to earnings. Lower is better.) Rival Lehman Bros. sells for just 10.1 times its estimated 2008 earnings.
You can also invest in the KBW Capital Markets exchange-traded fund (KCE). Its four biggest holdings are Morgan Stanley, Goldman Sachs, Merrill Lynch and Lehman Bros. The fund has gained 28.7% over the past 12 months. But be careful: When the M&A mania goes flat, so could those companies' earnings.
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