Murders & executions

One of the more memorable quotes from the movie American Psycho is when serial killer and M&A specialist Patrick Bateman is asked in a noisy nightclub what he does for a living.

“I’m into, uh, well, murders and executions, mostly”.

To which the club patron asks him if he likes it, and Bateman says it depends, and asks why?

“Well, most guys I know who are in mergers and acquisitions really don’t like it”.

With scenes like this and the portrayal of mergers and acquisitions in movies such as Wall Street, it is little wonder that the activity sometimes has a poor reputation.

During my drive to the office this morning was a news story on Radio 4 about US pharma giant Pfizer confirming their bid interest in UK pharma giant AstraZeneca.

This follows an initial £58.8bn cash and stocks offer at the start of the year, which reportedly concluded with AstraZeneca walking away from the deal.

Now Pfizer is back with a new offer and, should a hostile takeover be successful, it would represent the largest takeover of a UK firm by a foreign company.

Would a $100bn deal be too much of a stretch?

Perhaps unsurprisingly, the AstraZeneca share price has jumped by around 15% on news of the deal speculation, which was subsequently confirmed by Pfizer.

Mergers and acquisitions are generally good news for stock market investors, pushing up share prices and resulting in a positive market sentiment.

As the global economy continues to recover and large companies feel more confident spending their cash reserves on acquisitions, we expect to see more of this M&A activity over the coming months and years.

This is good news also for Patrick Bateman and Gordon Gekko, or more realistically those investment bankers who generate large profits from such deals.

UK investors could profit from share price growth in the companies being acquired, the banking sector and the wider market due to better sentiment.

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