Two ETFs to Play the Rebound in M&A Activity
November 7th, 2009 at 1:00pm by Tom Lydon
As the U.S. economy starts to show signs of a recovery, the market for mergers and acquisitions has shown signs of life. There are exchange traded funds (ETFs) you can look to as this market heats up even more in the coming year.
There have already been 41 announced U.S. deals worth an estimated $47.5 billion in November. Those who stand to benefit from this trend are large Wall Street banks and some boutique financial firms, states Jessica Papini of The Wall Street Journal.
An increase to access to capital markets is what most think is driving the pickup in the M&A market. The industry suffered over the past year as a result of the financial crisis and the inability of firms to access the capital markets. (Click here for more on capital markets).
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There will soon be two ETFs to play activity in corporate mergers and acquisitions.
IndexIQ will soon be launching the IQ ARB Merger Arbitrage ETF (NYSEArca: MNA), which tracks a basket of companies with publicly announced takeovers, says Benzinga. Merger arbitrage is purchasing stocks of targets for takeover for less than what the transaction price will be, then theoretically pocketing the difference.
This rebound in M&A could also benefit the SPDR KBW Capital Markets ETF (NYSEArca: KCE), which is up 40.7% year-to-date. KCE holds stocks that stand to benefit from an increase in M&A activity, such as Goldman Sachs (NYSE: GS) and Morgan Stanley (NYSE: MS); GS is 9.9% and MS is 8.1%.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.