The market for mergers and acquisitions (M&A) is red hot right now. And the analysts at Goldman Sachs believe it could get hotter.
“Global M&A volumes are on pace to hit $US4 trillion in 2015, just shy of the previous record set in 2007,” Goldman’s Robert Boroujerdi said. “However, M&A as a percentage of the world’s market cap sits at 5.8%, below the 20 year average of 6.7%. We would need to see a further $US650 bn of announcements to close the gap.”
Boroujerdi and his team have constructed a basket of 197 stocks that Goldman’s clients can trade as a portfolio.
We pulled out the 12 stocks in the portfolio that have market caps above $US5 billion and that Goldman believes have a “high, or 30-50%, probability of M&A activity in the next 12 months.”
Market Cap: $US29.87 billion
Industry: Healthcare, Biotech
Management Outlook: In an earnings call in late April, CFO Ian Smith talked about the financial goals of the company in the next few years. 'Especially thanks that I get a chance to reiterate the comments of what we target financially for the Company a few years from now. And it is to be a Company similar to our larger-cap peers, and that's one of high operating margins,' he said.
Market Cap: $US19.48 billion
Industry: Packaged Food and HHPC
Management Outlook: CEO Kasper Jakobsen, in the 1Q earning report, said, 'With over 70% of our business outside the United States, foreign currency translation negatively impacted our topline. Investment in demand-generation activities continues to be strong and we expect an increase to support strategic initiatives in the coming quarters.'
Market Cap: $US14.17 billion
Industry: Energy, Exploration and Production
Management Outlook: In the Q1 earnings report, President and CEO Dan Dinges said while shale extraction is still efficient for the company, low oil prices are having some impact. 'While pricing pressure remains a challenge for Marcellus gas in the near-term, Cabot's operating efficiencies in the play continue to exceed expectations,' he said.
Market Cap: $US13.71 billion
Industry: Healthcare, Life Sciences Tools and Dx
Management Outlook: Mike McCullen, President and CEO of the company, said in the 2Q earnings report that Agilent is continuing 'to make progress on streamlining our company.' He also said, 'Our continued focus on customers and strong market acceptance of our new products and sales structure are driving order growth.'
Market Cap: $US8.84 billion
Industry: Healthcare, Managed Care
Management Outlook: In the Q1 earnings report, CEO Michael Neidorff said, 'We had a strong start to 2015, delivering exceptional top and bottom line growth compared to last year. We continue to be successful in executing on our robust growth pipeline while maintaining operational discipline.'
Market Cap: $US8.62 billion
Industry: Security Software/Data Centres
Management Outlook: CEO David DeWalt said in the company's Q1 earnings report, 'FireEye is continuing to reach customers on a global scale, with growth balanced across all geographic regions. The company added more than 220 new customers in the first quarter and closed 28 transactions over one million dollars, a record for first quarter, and two times the number of seven-figure deals in the first quarter of 2014.'
Market Cap: $US8.34 billion
Management Outlook: In a recent interview with CNBC, CEO Gregg Engles talked about the struggle of the company to keep up with demand for their organic products. 'So, it just takes time, and the reason we are short is demand is just so strong. As long as this trend is a real trend, we're going to be short because the demand is outrunning our ability to produce supply.'
Market Cap: $US6.7 billion
Industry: Telecom and Cable
Management Outlook: According to the Wall Street Journal, at a recent conference CEO James Dolan responded to a question about consolidation of cable providers in New York saying, 'I think consolidation of that marketplace would provide a great deal of ingenuity and more access to resources for customers and lower prices.'
Market Cap: $US5.17 billion
Industry: Energy MLPs
Management Outlook: CEO Joe Bob Perkins said in the Q1 earnings realease, 'The combination of the diversity of our asset footprint and increasing margin from fee-based operations means we are well-positioned in an uncertain environment to deliver on our 2015 distribution and dividend growth expectations.'