In our Q 1 2009 Newsletter we mentioned buyouts would be good to see in the Capital Markets. Given the most recent negative movements in the capital markets there may be very reasonable prices for acquiring companies to add to their income stream and diversify though acquisition. Again, companies making the purchase often times are showing signs of strength. Purchases made at reasonable prices can often add to the long term positive position of the acquiring company.
The immediate market effects of a buyout are usually the following:
1. Acquiring company stock is under pressure as many investors always feel a company over pays for it’s acquisition.
2. Acquired company stock rises close to the announcement price, (generally the closer the stock rises to the announcement price the greater belief investors have the deal will be completed.)
We are happy as announcements of buyouts are beginning to occur and will monitor the situation for a more improved market condition and possible investment opportunities. JK