April 25 - Thanks to transactions unveiled by Valeant, Zimmer and GlaxoSmithKline this week, more than $1 trillion of deals have been announced so far this year. Should investors welcome more mergers?
▲ Hide Transcript
▶ View Transcript
So it was a really big week for the -- business lots of deals in fact. Year to date there's been one point one trillion dollars of announced deals according to Thomson Reuters data this is only that think the third time since 1980 that you seem that pretzel cross. This early in the year. And some interesting tidbits out of it rob you've been covering it because you're mr. pharma you have the value of the deal he had by a -- deal with. Zimmer and you had river transaction with a big pharma companies right here GSK and then rumored transactions -- well that that came out of Monday. But one of the interesting things that you put out a piece yesterday was that there have been 34 companies generally doing doing acquisitions this year. I have over a billion dollars and three quarters of them -- their stocks rise. Fire stalker yeah it normally it would respect the did and so it typically about half of them rise and half of them -- and I. Right now investors seem to love any deal I mean -- -- predicated on -- thing you know he cut costs investors say great I believe that. He's a valiant -- that they were gonna go out -- -- Another company and elegant elegant stock went up tremendously and even balanced as well it. Because investors believe and similar sought Zimmer got up and assumptions -- -- was the difference there or was it -- investors are actually saying here eliminate competitors that means you can raise prices for everyone and you. He -- and I think this is that the risk is there live kind of gave away the in the premium they were paying this sort of value of the synergies in the case of Valium. Found itself. Again there's tons of synergies to go around the synergy value to go around it and we said they can afford that mole. The case around them they kind of gave it away so it's not just still -- up right you know not strict corporate finance math it was the -- there that the strategy can be all right those are two ways to authorities -- reasons historically quite a lot of by as prices get down as they give a -- premium and -- listen and he value in the premium and maybe mole and the than say as -- thing well we get a little silly guys right in the investors don't. Believe in the idea that they're -- -- growth ever -- is let's talk about you know one plus one equals three in. In the -- -- people don't like that. Quote unquote revenue synergies. Of evidence that seems -- -- what they now they -- again well in the case of them are violent but that some of the others of course we're seeing you don't have. Much in the way of GDP growth you don't have enough much -- top line growth I mean if you companies whether it's an Amazon can still get 20% -- That that this Starbucks can get a bit more but it basically you don't. You birdie -- you've got to find another company squeeze up the costs and and until we can get bottom line growth is that it. It is and this is also way to get public growth of and that's what -- have Valiante that's -- whole thing both top and bottom line growth has been buying companies and that's what they do right so that's -- -- they machines Zimmer is more of a sort of industry restructuring story I guess it's a visit and I have things that would -- a lot of it. And if people seem to have come around did it again that revenue -- revenue is gonna happen growth is gonna happen with these -- -- that's -- you wanna start to get a little skeptical -- And don't forget -- because investors are welcoming mergers throw in the fact that -- -- an atomic cash and balance -- departments fashion got tons of cash. It's easy to borrow money so -- all the all the all the elements are there for lots of deals okay well thank you for that. Well we've got more breaking views next week.