The 2025 M&A boom is just beginning – and here are five potential targets
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Stock investors can look back at 2025 as the year of acquisition. “It’s going to be a big year,” predicts Brandon Nelson, senior portfolio manager at Calamos Investments. “Many stars are aligned for mergers and acquisitions.”
Nelson cites three positive factors behind the M&A boom.
1. New Leadership for the US Federal Trade Commission (FTC): More merger-friendly, Andrew Ferguson has replaced Lina Kahn, the Biden administration, who has been actively challenging the acquisition.
“With the new (Trump) administration, particularly the changes in the FTC, the only condition is to become hostile,” Nelson said. “There’s a lot of demand for pent-ups.”
The demand is already emerging. Nelson points to the proposed acquisitions of intracellular therapy ITCI, Inari Medical Nari, Accolade ACCD, and H&E equipment service HEE over the past few weeks. These acquisition announcements instantly brought shareholder benefits from 50% to 100%. This is just the beginning, Nelson says.
2. The number of “animal spirits” is increasing: Justin Menne, portfolio manager at Harbor Capital Advisors, said the company management team is hunger for acquisitions. Menne points out that business confidence is growing due to its continued economic strength and the prospects for deregulation under the Trump administration. He says the rise in investment bank fees revealed in recent revenue news from JPMorgan Chase JPM, Goldman Sachs GS and Morgan Stanley MS is a sign that transactions are already recovering.
3. Credit terms have been relaxed: Andy Wells, Chief Investment Officer at Sanjac Alpha, Investment Manager, said it’s making it easier for businesses to do business. Wells refers to the Fed’s supply and demand measure for commercial and industrial loans, which shows the net percentage of lenders with zero lenders tightening their lending standards.
There are five companies that you may purchase. The key here is that investors say these names should work even if they don’t have a buyback bid. That’s important because betting only on takeover actions is very speculative.
1. Instacart: Emily Flippen, senior investment analyst at Motley Fool, says the grocery distribution company is perfect for Walmart WMT, which can handle back-end grocery distribution. “Walmart has a tendency to do these synergistic deals,” she says. Walmart, for example, has made a major investment in e-commerce company Flipkart to complement its retail business in India. However, even without the acquisition, Instacart Cart stocks are expanding profit margins and believe they will work well as investors generate solid free cash flow that doesn’t fully price the stock price. .
Year 2: Roku Roku offers devices that allow households to stream content on television. Generate revenue from distribution fees for advertising sales and streaming services. This service is becoming more and more popular. As of September 2024, Roku had 85.5 million households, an increase of 13% from the previous year. “Roku has found a way to interact with customers in a way that’s not intrusive way, and they’re doing well,” says Wells of Sanjac Alpha. He believes this could make Roku attractive to Walmart. Walmart wants to expand its home entertainment and streaming to compete with Amazon AMZN. “Roku has an incredible consumer engagement profile,” Wells says. “I really like them, whether they’re being bought or not. They have a very durable consumer base.”
3. Viking Treatment: Weight loss drugs are currently on a short list of drugs eligible for Medicare price negotiations under the Inflation Reduction Act. Upstart’s weight loss drug developer Viking Therapeutics VKTX shares have declined as a result, making it an attractive candidate for acquisition. “The only reason they didn’t get it was the possibility of antitrust scrutiny,” Wells says. Without the acquisition, he added that the company could do well because of the strength of its drug pipeline.
4. ADMABiologics: ADMA Biologics Adma sells plasma-based products containing antibodies that help prevent infection in patients with weak immune systems. Revenue growth is improving margins, especially for lead products, Asceniv. According to Calamos Portfolio Manager Nelson, the company is able to record revenue of $480 million this year, compared to $258 million this year. “They have a lot of momentum in their business, and that’s what the acquiring companies want,” adds Nelson. However, even without acquisitions, the company’s growth should surpass its stock price.
5. Rush Street Interactive: Online gaming companies are seeing epic sales growth. Rush Street Interactive RSI stands out in the space as they find ways to get customers to engage in rewards and special bonuses. It also looks attractive as it earns two-thirds of its revenue from casino games. It offers international exposure to Colombia, Mexico and Peru. These qualities may make it appealing to larger gaming companies, Nelson said. But even without shopping, the company and its stock should outperform.
We consider potential M&A targets as part of our investment strategy, so here are some tips to keep in mind.
1. Don’t chase the rising stocks as financial media publishes rumors of acquisitions. The news could be a fake head, or the ultimate price could be lower than what you’re expecting, Nelson says. “I don’t think those are investable moments because you can be whipped,” he says.
2. If you own a stock that goes up a lot on Takeover News, it usually makes sense to sell it immediately. Bidding wars are rare. Stocks are usually a little below the acquisition price offered before the transaction is finalized, but it makes no sense to wait a few months for the last few percentage points due to opportunity costs. “I usually redeploy capital with higher expectations and higher to improve my return on investment,” says Nelson. What’s more, the transaction could collapse.
3. M&A-specific ETFs including NYLI Merger Agreed MNA, AltShares Merger Arbitration ARB, and First Trust Merger Arbitration MARB are a good way to profit from merger-related stock profits, as the term “merger” is in their name. That may seem like that. However, these funds use an arbitrage strategy to attempt to misuse stock price inconsistencies after the arbitrator is announced. Moreover, all of these ETFs have degraded the performance of event-driven fund categories in most years they existed, according to investment researcher Morningstar.
