Thursday, June 15, 2006

It is here!

No - not talking about a market bottom, a bear market, an end to the rate hikes, deflation, real-estate bust (that was here) or Angelina Jolie's baby!

I am talking about the urge to merge. The current market carnage has meant that the sudden uptick in deals has largely gone unnoticed. It started with a bang right after the Labor day weekend with an offer by management to take Kinder Morgan private, in what would be the largest management buyout in U.S history. Investors have piled on, expecting a higher offer. Even without a revised offer, this isn't too far behind the largest leveraged buyout, management or otherwise.

Since the Kinder Morgan announcement, deals have averaged around 2 a day, with practically all being cash deals. A substantial number have been offers from management .

Among the recent forecasts - that we will see a private equity tech buyout in the $20 billion vicinity. I know of a perfect match - Computer Associates (CA), which looks attractive today. The same buyer will also find BMC appealing. Together they will cross the $20 billion mark!

There have been a few false starts over the last 2 years, even as the folks across the pond have been running a high M&A fever. But since the latest uptick has gone unnoticed, I will say that this is it - the silent start to the boom!

Last year the dollar held strong, going against majority expectations, due to, among other factors, the one-time tax amnesty for foreign profits repatriation. Will a huge M&A boom with the primary buyers of U.S assets being outside the country, lead to a stronger dollar as more greenbacks come back! Won't be the first time that the majority got it wrong.


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