Mergers Are About to Explode in America (So Is The Stock Market)

Here's a list of stocks that will likely be targets of buyouts in 2025 and the impact that's had on markets in the past.

I just spent the past week reading through bank earnings reports.

One thing stood out.

Across the board banking stock executives see mergers and acquisitions (M&A) activity potentially picking.

For an investment bank, this means more fees.

Woo hoo … Great for them.

But what about us?

Buy investment bank stocks, see you in 4 years, end of newsletter.

Just kidding … kind of.

For us as investors - this could signal one of the best years to invest in individual stocks.

The data backs this up.

Source: imaa-institute.org

The number of merger and acquisitions worldwide declined 4 years in a row under President Biden.

But it actually goes deeper than that.

Notice what’s happened to the markets when you had years of M&A activity pick up.

• 1993 - 1999

  S&P 500 Average Return: 19.58%
  Worst Year: 1994 -1.54%
  Best Year: 1995 +34.11%

• 2003 - 2007
  S&P 500 Average Return: 11%
  Worst Year: 2005 +3%
  Best Year: 2003 +26.38%

• 2013 - 2015
  S&P 500 Average Return: 13.42%
  Worst Year: 2015 -0.73%
  Best Year: 2013 +29.6%

• 2017 - 2021 (Trump First Term + Biden 1 year)
  S&P 500 Average Return: 17%
  Worst Year: 2018 -6.24%
  Best Year: 2019 +28.88%

There’s probably a million things you can pull from this data.

But the one thing that stands out to me is the worst year during these M&A expansion phases is in 2018 when the S&P 500 was down 6.24%.

That means it’s time for you to buckle up and be prepared to make some money.

There’s a few reasons why M&A drives stock prices higher.

First, as companies are bought out - it raises the valuation of others within the same sector.

Because companies are bought for a premium - it drives up the value of the remaining public companies to invest in.

Pretty simple.

I actually think it goes one layer further.

I believe it motivates the founder/CEO/leadership.

If companies are being bought up and your CEO buddies are cashing in … that only makes you work harder.

Nothing like the prospect of a multibillion dollar exit to get you fired up to work in the morning.

This feeling can trickle down across industries.

So how do we know M&A activity will increase under Trump?

You’re right, it’s not certain.

But, the fact that investment banks are excited is a good sign.

But I think it goes deeper.

For several years many companies have been cutting staff along with raising prices to drive better results.

At some point businesses can’t cut expenses any further.

Prices have a limit.

Businesses must actually focus on real growth in 2025.

I believe cash rich companies will turn to M&A in 2025 for that growth.

Some high profile deals could get us kicked off early with TikTok and Intel INTC 0.00%↑ .

TikTok is in its own category being a “forced sale” but will be a massive news making event.

It will also might reset the bar higher on social media valuations.

The TikTok story is unfolding rather quickly, so I’ll wait to go deeper on the sale at a later date.

The Intel story will be interesting.

Recently it was rumored that Elon Musk, Global Foundries, and Qualcomm QCOM 0.00%↑ all had executive private jets in Mar-a-lago, Florida.

I believe Intel will be broken up into several companies and I talk about it in more depth in this video:

But there’s plenty of other deals that will likely happen too.

Flying under the radar was Adobe ADBE 0.00%↑ filing what’s called a “mixed shelf” offering.

The offering allows Adobe to sell securities - usually common or preferred stock - so Adobe can raise funds when needed.

Adobe has a very profitable business and has no immediate needs for more cash - but the company is getting crushed by competition.

Platforms like TikTok and now Meta META 0.00%↑ are launching video/photo editing tool suites.

That’s bad news for Adobe.

In 2022 Adobe tried to acquire Figma for $20B but failed. The failure was due to government blocking the deal.

I would expect Adobe to be active in 2025 trying to acquire competitors.

Another stock that has a track record of acquisition is Salesforce CRM 0.00%↑

The company was basically built by piecing together various acquisitions.

But investors grew frustrated by larger ones like Slack, Tableau, and Mulesoft which came with high price tags, but not a ton of additional value.

Last year CEO Marc Benioff said he was open to buy larger companies - but has spent the past year buying smaller startups.

Either way, Salesforce and Adobe are the tip of the iceberg for tech stocks that are projected to grow revenues by 7-10% in 2025 … but have no real easy way to grow beyond that unless they acquire growth.

M&A is heating up in the entertainment space as well.

Disney DIS 0.00%↑ recently announced a combination with FuboTV FUBO 0.00%↑ that sent shares of the fledgling steaming company soaring.

Another streaming platform that is likely to get attention is Roku ROKU 0.00%↑ . There’s been rumors in the past suggesting Disney, Amazon or Netflix could be interested.

These are just a handful of ideas.

If you need some more ideas recall I recommended these stocks when they were near 52 week lows back in December:

A few like Starbucks SBUX 0.00%↑ and Louis Vuitton are already ripping higher in 2025 but this is going to be the year that keeps on giving.

Stay focused and informed - I believe this will be your best year investing of all time.

Be back soon, please follow me on social media too - I give out picks that can make you money there too.

Colin

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