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Posted by Nick Potts
Nick Potts

The mergers and acquisitions space is on fire! It has been widely reported by leading publications that a record $2.5 trillion in mergers and acquisitions took place in the first half of 2018, of which American companies made up the largest proportion. This far surpasses the level of M&A activity of the same period last year. If this continues, we could see 2015’s record broken with excess of $5 trillion M&A deals made by the end of the year.

Mergers and Acquisitions prove both lucrative when it comes to growth both for companies and portfolio managers alike. Keeping pace of rumors surrounding M&A can provide opportunistic trades in both companies or sectors, timely modification of positions, actionable insights and most importantly, disaster insurance on any short positions.

Why is the M&A market so active at the moment?

Regarding the United States, many commentators surmise that two main contributing factors are, the cut in corporate tax under the current administration and the rise of numerous technological disruptors. This has led to the market becoming fiercely competitive, whereby the larger organization can only keep pace by consolidating the market. Due to the accelerating growth rate of new technologies and data, the surge in M&A activity may be fundamentally rooted in the fact that large enterprises are finding it difficult to overcome internal bureaucracy and innovate.

How do you stay ahead of actionable M&A rumors when rumors can emanate from any one of countless digital data sources? The fact is, you can’t and the problem is only getting worse as the explosion in digital information continues to grow far faster than our biological processing capabilities. Human analysts, portfolio managers and traders can evolve and get ahead of the curve by leveraging artificially intelligent tools that free cognitive bandwidth and facilitate clearer thinking.

A.I. can continuously read and understand huge volumes of digital information within the specific context of M&A, pushing potentially market-moving actionable M&A rumors to users through a glass box that attributes rumors to actual sources. Looking back at June (using our own system, Rumor Hound M&A) we sourced 489 rumors. Forty-five of those rumors identified  5 announced deals and had an average lead time of 159 days from the initial sourced rumor to the deal announcement.

AcquisitionsJune

Pinnacle Foods Inc. (PF)

First rumor detected: 11-30-2017 (Stock Price $58.20)

Deal announced: 06-27-2018 (Stock Price $65.20 +12.0%)

PF

Rent-A-Center, Inc. (RCII)

First rumor detected: 02-21-2018 (Stock Price $8.49)

Deal announced: 06-18-2018 (Stock Price $14.64 +72.4%)

RCII (2)

Envision Healthcare Corporation (EVHC)

First rumor detected: 02-08-2018 (Stock Price $35.78)

Deal announced: 06-18-2018 (Stock Price $44.69 +24.9%)

EVHC

Twenty-First Century Fox, Inc. (FOXA)

First rumor detected: 10-12-2017 (Stock Price $26.32)

Deal announced: 06-14-2018 (Stock Price $44.37 +68.6%)

FOXA

AmTrust Financial Services Inc (AFSI)

First rumor detected: 01-12-2018 (Stock Price $10.29)

Deal announced: 06-18-2018 (Stock Price $14.32 +39.2%)

AFSI

Will the deals in July beat last year's record?

We will find out soon enough. "Dealmakers are broadly bullish about the prospects for M&A during 2018" reports Global Finance and irrespective of whether the market does take a downturn, companies will still be acquired largely due to the exponential nature of technological advancement as well as the innovation gap faced by slow enterprises.

Generating alpha in the M&A space will come down to an investor's ability to efficiently sift through countless sources quickly, identify credible rumors that may move stock prices and act on differentiated insights faster than competitors.

Accrete.AI’s Rumor Hound platform was specifically tuned to listen for market moving M&A chatter. On average, M&A rumors that are identified in endless amounts of digital noise move stocks an average of 4.7% in excess of sector specific benchmarks, largely due to outsized gains on true positives. In other words, false positives don’t hurt that badly and it is wise to pay attention to every rumor that Rumor Hound pushes because it’s likely to move stock prices. In fact, many of the rumors that have been identified in low credibility chatter by Rumor Hound have even resulted in announced deals well before high credibility sources reported on the news.

Rumor Hound for M&A helps portfolio managers stay ahead of potentially disastrous M&A news and avoid being blindsided; helps investors make opportunistic trades in rumored companies and sectors; allows equity managers to modify existing positions; helps investment bankers source leads before competitors and provides dealers with real-time actionable insights that they can pass along to their clients. To learn more about how Rumor Hound for M&A can help you generate alpha, please visit the Rumor Hound product details page at: https://www.accrete.ai/rumorhound/


Topics: Mergers and Acquisitions