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3 Industries and 3 Stocks Riding a 2012 M&A Boom

NEW YORK ( TheStreet) -- A hot start to some dealmaking sectors in 2012 is helping to push up biotech, chemicals and engineering stocks. Smart traders can ride the wave as prices push up on deal speculation.

Overall, biotechnology is leading the deals way with $9.1 billion worth of U.S. announced mergers disclosed in 34 deals, according to data compiled by Bloomberg. The chemicals industry has seen $4.5 billion in deal activity on 11 tie-ups and the engineering sector has re-emerged as rife for consolidation.

Companies benefitting from the fastest first month start to the Standard & Poor's 500 Index in 25 years also may see shares leap if bids and bankers jump back into the M&A fray.

Globally, January M&A volumes of $148.2 billion were the lowest monthly volume since the summer of 2009 and a 45% drop from the same time in 2011, according to Dealogic. In the U.S., $57.8 billion worth of January deals represented and even greater 53% year-over-year drop. European deals markets fared even worse, hitting January lows not seen since 2003, Dealogic data shows.

Nevertheless, consolidation is a trend worth watching because of the premiums being paid in takeovers and the continued need for some companies to grow through mergers. For instance, the largest U.S. deal of the year, Roche's $5.7 billion hostile offer to buy hostile offer to buy Illumina (ILMN) was cut at an over 33% premium, with many investors and analysts expecting an even higher bid to emerge.

Meanwhile, Eastman Chemical's (EMN - Get Report) $3.4 billion acquisition of specialty plastics and chemicals maker Solutia (SOA) took the sector out of the merger "penalty box" according to industry analysts, pushing competitor shares higher. ABB's (ABB - Get Report) $3.9 billion deal for U.S. power distribution equipment specialist Thomas & Betts (TNB) may also could spark more deals, according to analysts.

Here's a look at the hot 2012 industry sectors and three potential deals to watch for.

For more on M&A see, 10 top Morningstar M&A picks and 5 big deals that may flop in 2012.
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