Acquisition Prediction: Pfizer acquires GILD
First off, Pfizer is known for high risk, big acquisitions. Pfizer paid an absolutely ridiculous $14 billion for half of Xtandi’s revenue with Medivation earlier in 2016. It paid $16 billion for Hospira, and then it failed to acquire Allergan in a whopping $160 billion deal. Therefore, Pfizer paying $125 billion for GILD does not sound like a bad idea.
Not only would Pfizer instantly become the leader in HCV and HIV, but it would solidify $15 billion or more in cash flow for many years to come while absorbing Gilead’s $32 billion cash pile.
In an M&A landscape where everything is expensive, GILD would be the absolute value investment. GILD trades at 5x earnings minus cash compared to a 12.5x forward premium for Pfizer.
In other words, Pfizer would instantly create shareholder value in its own stock by acquiring GILD. It really would be the perfect tie-up, making Pfizer a leader in two large industries while giving it a cash cow and a very underrated pipeline. I think Pfizer will be smart enough to see the value in GILD.
Acquisition Prediction: IBM makes move in machine data with SPLK
With 40% growth, Splunk Inc (NASDAQ:SPLK) has been called an M&A target before. However, 2017 is different as big tech gears up for M&A in AI, machine learning, and data analytics.
Splunk’s technology was created to thrive in the IoT, with it able to collect and analyze data from tens of thousands of sensors and machines that are collecting data. The company specializes in machine data, like smartphones, servers, computers, websites, or sensors. Meanwhile, IBM has spent billions to boost its capabilities to collect and analyze data.
SPLK would be a nice addition to what IBM has already built. The question is whether IBM wants to pay $9 or $10 billion for SPLK? If not, I am quite confident that a competitor will.