Market Overview

M&A Expert Says Market Volatility Delaying Deals, But Not Discouraging Them

M&A Expert Says Market Volatility Delaying Deals, But Not Discouraging Them

This week’s $14 billion merger between Johnson Controls Inc (NYSE: JCI) and Tyco International demonstrates that there are certainly still large M&A deals happening in the face of the global economic uncertainty that has produced a shaky opening month for markets in 2016.

However, has the M&A boom already peaked and will deals this size be few and far between from now on?

Benzinga had the chance to speak with Chris Pultz of the Kellner Merger Fund this weak about both the Johnson/Tyco deal and the health of the overall M&A environment.

Pultz sees the Johnson/Tyco deal as a complementary deal that goes beyond just the massive tax advantages.

“It’s going to be Johnson Controls being able to offer a full suite of products for any bid they go in for, where they can say now in addition to your HVAC, we can also set up your security system and we can set up your fire security and have it all in one centralized place and you only have to deal with one person,” he told Benzinga.

Related Link: Could Johnson/Tyco Inversion Have Happened Under A President Trump?

When asked about the impact that global economic uncertainty has had on the M&A boom, Pultz said that Kellner believes it has affected timing more than overall enthusiasm.

“Anecdotally, we’ve heard from bankers that the behind-the-scenes process is still going full-steam ahead, so there are a lot of talks happening. It’s just that now those talks may extend out, and instead of announcing a deal in the first quarter they announce a deal in the second quarter after the market stabilizes a little bit.”

Pultz added that Keller never expected 2016 to be as strong of a year for M&A volumes as 2015 but that the firm still expects a high level of activity this year compared to historical levels.

Disclosure: the author holds no position in the stocks mentioned.

Latest Ratings for JCI

Oct 2020Morgan StanleyMaintainsEqual-Weight
Aug 2020RBC CapitalUpgradesSector PerformOutperform
Aug 2020Morgan StanleyMaintainsEqual-Weight

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