Twitter likely focus for merger and acquisition

Analysts at Goldman Sachs have said that the market for mergers and acquisitions is “healthier than headline volumes suggest” and pinpointed some tech stocks as ripe for merger and acquisition.

In a note published before yesterday’s announcement that Microsoft is acquiring LinkedIn for over €23bn (see p.17), Goldman analysts added LinkedIn, T-Mobile US, TripAdvisor, and Twitter to the bank’s proprietary basket of companies that it believes have at least a 15% chance of seeing “strategic” merger and acquistion in the next year.

Goldman categorises companies in its merger and acquistion basket as a ‘one’ or ‘two,’ with one meaning that the analysts believe there is a 30% to 50% chance of strategic merger and acquisition activity and two implying a 15% to 30% chance.

Twitter, LinkedIn, T-Mobile, and TripAdvisor were all ranked at ‘two’ while names including SunEdison SemiConductor and Kimberley-Clark were new additions that garnered ‘ones’.

News of the LinkedIn deal caused shares of Twitter to take wing. They were up 8.4% in early trading, while LinkedIn jumped 41%.

Goldman’s merger and acquistion basket was last updated a year ago — back when Twitter was still trading above $35 and LinkedIn shares were at $213.

Goldman argued that the merger and acquistion market is healthier than it appears despite a 28% drop in total deal volume year-over-year.