Merger and acquisitions activity is picking up as the economy gains momentum and could continue even through an interest rate hike. Meanwhile, exchange traded fund investors can target some areas of the market that are consolidating.
Senior MD and global head of Blackstone Advisory Partners, John Studzinski, argued that underlying factors, like wage inflation and companies’ needs to divest cash hoards, will continue to drive M&A activity, even through a Federal Reserve rate hike, reports Jenny Cosgrave for CNBC.
“Rates are low now, but they are going to go up, but not so much that it’s going to change the reason for a management team or a board to support a major strategic deal, given the amount of cash they have already on their balance sheets,” Studzinski said on CNBC.
Looking at sectors with the most inquiries for M&A advice, Studzinski pointed to tech, media and telecom sectors with “very robust” interest.
Some have already argued that tech companies could be targeting software firms with their large cash hoards. Investors may potentially capture the upside of the greater M&A activity through broad software sector ETFs, including the iShares North American Tech-Software ETF (NYSEArca: IGV), SPDR S&P Software & Services ETF (NYSEArca: XSW) and PowerShares Dynamic Software Portfolio (NYSEArca: PSJ). [Corporate Tax Reform Could Boost Tech ETFs]
For media exposure, the PowerShares Dynamic Media Portfolio (NYSEArca: PBS) tracks U.S. media companies. PBS includes a 4.9% position in Time Warner (NYSE: TWX), which experienced a huge surge last month on a merger deal with Charter Communications (NasdaqGS: CHTR), which is 2.6% of PBS.
“The consumer space increasingly active and of course the healthcare space – healthcare broadly defined – pharmaceutical, equipment, services, the whole healthcare space undergoing a lot of scrutiny in terms of deals and just started to see the beginning of a lot of activity in chemicals,” Studzinski added.
Deals in the pharmaceutical, medical and biotech space is also at an all-time year-to-date high.
Additionally, the PowerShares Dynamic Biotechnology & Genome Portfolio (NYSEArca: PBE), BioShares Biotechnology Clinical Trials Fund (NasdaqGM: BBC) and ALPS Medical Breakthroughs ETF (NYSEArca: SBIO) have all benefited from their tilt toward smaller biotech names that are developing new targeted treatments. [ETFs for the Next Biotech Takeover Targets]
For more information on the market sectors, visit our sector ETFs category.
Max Chen contributed to this article.