Smaller companies with low market caps could see big gains
- M&A activity is picking up, benefiting smaller companies that could be buyout targets
- Companies in the U.S. have announced $388.2 billion of M&A this year, 63% higher than last year
- Morgan Stanley offers criteria for finding potential buyout targets
- Companies like Harley-Davidson, Newell Brands, Victoria’s Secret, Kohl’s, Sarepta Therapeutics, QuantumScape, Under Armour, and Teladoc Health are potential buyout candidates
- Analysts have reduced earnings-per-share forecasts for some of these companies
- Teladoc Health is using stock-based employee compensation to free up cash
- No public expressions of interest in these companies yet
Mergers and acquisitions (M&A) activity is on the rise, which is good news for smaller companies that could be potential buyout targets. Last year, M&A activity was slow due to rising interest rates and weak corporate profit outlook. However, this year, with stabilized rates and growing profits, management teams are more confident in acquiring new assets. Companies in the U.S. have already announced $388.2 billion of M&A, a 63% increase compared to last year. According to Morgan Stanley, potential buyout targets are companies with smaller market capitalization, generally below $5 billion. These companies have struggled to compete in their industries and have relatively low market caps. Some potential buyout candidates identified by Morgan Stanley include Harley-Davidson, Newell Brands, Victoria’s Secret, Kohl’s, Sarepta Therapeutics, QuantumScape, Under Armour, and Teladoc Health. These companies have market caps between $1.5 billion and $11.4 billion and trade below their record highs. However, analysts have reduced earnings-per-share forecasts for some of these companies. Teladoc Health, for example, is down almost 95% from its all-time high and is using stock-based employee compensation to free up cash. While there have been no public expressions of interest in these companies yet, with M&A activity back in fashion, anything is possible.
Factuality Level: 7
Factuality Justification: The article provides a detailed analysis of the current M&A landscape, including reasons for the recent increase in activity, potential buyout targets, and criteria for identifying such targets. The information presented is based on current market trends and expert opinions, without significant bias or misleading statements. However, some parts of the article could be seen as overly speculative, especially when discussing potential future outcomes for specific companies.
Noise Level: 3
Noise Justification: The article provides a detailed analysis of the current M&A landscape, including reasons for the resurgence of activity, potential buyout targets, and criteria for identifying them. It offers specific examples of companies that could be acquisition targets and explains the rationale behind each selection. The article stays on topic throughout and supports its claims with data and examples. Overall, it provides actionable insights for investors interested in M&A opportunities.
Financial Relevance: Yes
Financial Markets Impacted: The article discusses the increase in mergers and acquisitions (M&A) activity, which can impact financial markets and companies involved in these deals.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article primarily focuses on the resurgence of M&A activity and its potential impact on smaller companies. There is no mention of any extreme events or their impact.
Public Companies: Harley-Davidson (HOG), Newell Brands (NWL), Victoria’s Secret (private), Kohl’s (KSS), Sarepta Therapeutics (SRPT), QuantumScape (private), Under Armour (UAA), Teladoc Health (TDOC)
Private Companies: Victoria’s Secret,QuantumScape
Key People: Rayna Lesser Hannaway (Portfolio Manager), Stephanie Linnartz (CEO), Kevin Plank (Founder)
Reported publicly:
www.marketwatch.com 
