Saturday, June 7, 2014

Will General Electric's Bid For Alstom Kick-Off Takeover Mania?

The questions that most industrial sector followers must be asking themselves about General Electric Company's  intended purchase of Alstom's energy business, are whether it will kick-start a prolonged bout of takeover activity in the industrial sector, and which companies could be involved?  Moreover, what does the deal mean for General Electric and the industrial sector at large?

More deals to come
The answer to the first question is that the intended GE-Alstom deal isn't so much a catalyst for deal making in the sector, but rather a reflection of what many of its peers have already been saying.

For example, Danaher's  management recently outlined that they felt they had the ability to deploy $8 billion toward acquisitions, and that dealmaking would be the "primary focus" of its capital allocation strategy. Market speculation will inevitably focus on Agilent Technologies, not least because it's spinning off its test and measurement business away from its core life science and diagnostics operations.  Another potential target could be filtration and separation company, Pall Corp., although it's hard not to think that its current valuation of 30 times earnings doesn't have some sort of takeover premium built in.