It looks like 2017 is likely to be a big year for mergers & acquisitions. Several factors have come together over the past few months that have made the coming year ripe for consolidation. Industries like biotechnology and retail were beaten down in 2016, and that has opened the door for a flurry of activity within those sectors.
Not only that, but the Donald Trump administration could also provide a boost for M&A activity. Trump’s “America first” focus, as well as his plans to loosen regulations weighing on U.S. corporations, may make it easier for companies to merge.
One of President Trump’s campaign promises was to reduce the tax burden that U.S. companies face. A lower corporate tax rate means U.S. firms will enjoy an influx of cash, which could in turn give them the means they need to invest in growth via mergers & acquisitions.
Here’s a look at three firms that are likely to see some M&A action in the year ahead.
Possible Mergers & Acquisitions: Netflix (NFLX)
Streaming service Netflix Inc. (NASDAQ:NFLX) has seen its share price soar over the past two years as the firm expanded its reach across the globe. NFLX has been able to tap into popular culture and create original series that appeal to the masses. The firm has also made its way overseas and proven that online streaming services are gaining traction across the globe.
As one of the most popular names in the industry, Netflix’s expertise makes it an appealing takeover target for tech firms that need to add streaming to their business model. While companies like Walt Disney Co (NYSE:DIS) or Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) might be interested in snapping NFLX up, it’s Apple Inc. (NASDAQ:AAPL) that has the most potential as a buyer.
Apple not only has the cash necessary to make such a large acquisition, but the company stands to gain quite a lot by owning NFLX.
Netflix has done for movies and TV what Apple did for music back in the early 2000’s. However, in recent months AAPL has taken a lot of flak for being unable to innovate. By adding NFLX stock’s streaming business to its repertoire, Apple would put itself at the forefront of the entertainment business.
Possible Mergers & Acquisitions: Barnes & Noble (BKS)
Brick-and-mortar bookstore Barnes & Noble, Inc. (NYSE:BKS) has been struggling under the weight of online retailers, namely Amazon.com, Inc. (NASDAQ:AMZN), and now the company’s depressed stock price makes it an appealing takeover target.
One firm that is likely to be interested in adding BKS to its business is the company that single-handedly pressured the bookstore into this position- Amazon. AMZN has recently made a push into having its own physical bookstores, and Barnes and Noble’s locations could be easily converted into Amazon locations with very few expensive upgrades.
Not only has Barnes & Noble followed in Amazon’s footsteps by offering an electronic e-reader, but BKS locations have a designated space in each store where the e-readers are sold. That would make it relatively easy for Amazon to rebrand the stores and sell their own Kindle devices.
Possible Mergers & Acquisitions: Acadia Pharmaceuticals (ACAD)
The biotech space is prime takeover territory, as the sector has been beaten down over the past year, making consolidation within the industry much more likely. Investors can expect to see a flurry of M&A activity in this space throughout the coming year as bigger firms look to beef up their drug portfolios by acquiring their smaller, more specialized peers.
Acadia Pharmaceuticals Inc (NASDAQ:ACAD) is one such company that is likely to see some takeover action sometime over the course of the year. The company has already been the subject of takeover rumors over the past few months, and 2017 looks like the year it might happen.
One of the reasons Acadia looks so enticing to big pharma firms is the company’s drug Nuplazid, which has already been approved to treat psychosis experienced by those affected by Parkinson’s disease. However, what’s more promising is the fact that Nuplazid may also gain approval to be used for other mental illnesses, including Alzheimer’s disease — which could become a major money maker.
It’s unclear which firm will strike first, but rumor has it that everyone from Pfizer Inc. (NYSE:PFE) to Biogen Inc (NASDAQ:BIIB) to Gilead Sciences, Inc. (NASDAQ:GILD) is interested in buying Acadia.
As of this writing, Laura Hoy was long AAPL and NFLX stock.
