We all dream of uncovering that next hot buyout target.
Once a deal hits the news, stocks can soar overnight. So it’s no surprise then, that many investors spend considerable effort tracking them down, as do we.
In 2015, we saw $4.3 trillion in deals, smashing a $4.29 trillion record set in 2007. Pfizer announced it would acquire Allergan for $160 billion. Dow Chemical and DuPont announced a $130 billion mega merger. AB Inbev announced a $107 billion deal with SABMiller.
Then, in 2016, the global community saw another $1.7 trillion in deals, including a $1.5 billion deal with Jazz Pharmaceuticals acquiring Celator Pharmaceuticals.
That deal by the way, lead to a 1,617% return for subscribers of The Cheap Investor.
All thanks to boardroom confidence, cheaper debt financing with interest rates at historic lows, and pressures to improve profitability.
And while biotech and technology firms saw their fair share of deals, so did the oil sector.
In fact, over the last year, oil companies saw nearly $200 billion in deals, as crude oil prices stabilized and major producers agreed to production cuts.
Look at refineries for example.
One Rock Capital Partners acquired a Hawaii refinery from Chevron for undisclosed terms. Par Pacific Holdings picked up a refinery from Black Elk Refining for $271 million.
Western Refining completed the merger of the remaining 62% of North Tier Energy for $1.5 billion. Tesoro acquired a refinery from Calumet Specialty Productions. PBF Energy closed a $537.5 million deal for a refinery owned by Exxon Mobil.
One of our favorite merger stories had to do with Western Refining (WNR).
Back in February 2010, The Cheap Investor recommended the stock at $4.80 a share. It would soar as much as 969% to $51.31 not long after. While it would pull back to $18 over the last year, it was more attractive than ever thanks to acquisitions that would hand it strong sets of refining assets near the oil-heavy Bakken formation and Permian Basin.
That’s exactly why NYSE-listed Tesoro Corporation (TSO) agreed to buy WNR in a deal valued at $6.4 billion, sending the WNR stock from a November 2016 low of $26 to $39.66.
In short, mergers and acquisitions can lead to substantial profit opportunities. It’s no wonder why many investors – especially us – attempt to track them down.