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Acquisitions - with a new dimension

Monday 17 August 2015

In my blog of the 8th of June, 2015, I pointed to a wave of mergers on stock exchanges abroad: "The breathtaking merger wave is continuing".

Now, only two months later, the rapid pace of company acquisitions is continuing. In a previously unexpected new dimension due to the summer break.  


Financial markets are full of cash. Interest rates are close to zero. While consumer inflation is low, thanks to productivity improvements. This has created an immense asset inflation in a world in transition. Here are the latest examples:

 

  1. After lengthy negotiations, in the United States in the health sector a major acquisition is in the works. The health insurer AETNA wants the acquire its competitor HUMANA for USD 37 billion.

    2.  Even in the ailing oil sector MARATHON Petroleum made an offer to acquire Mark West Energy Partners for USD 15.8 billion.

 

    3.  In the biotech pharmaceutical sector SHIRE from Great Britain offered USD 30 billion for BAXALTA (a former spin-off from the pharmaceutical giant  

         Baxter).

 

    4.  The latest deal now comes from Value Investor No. 1, Warren Buffett from Omaha. His investment company wants to acquire the aircraft supplier

         Precision Cast Parts PCC and buy the company for USD 37.2 billion. He is willing to pay the 3.7 times annual sales. So much for value investing!

 

 

And the bottom line for investors? As for the 13 years in ME Fund, evidenced by Special Values: There will be a shortage of first-class companies on the stock exchange. Stock quotes, which might now appear to be historically expensive, are often not excessive. We live in a new era of financial flooding. In comparison, the number of promising and solid companies in global business is small. Good prospects exist for anxiety-free and patient shareholders.