This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Best Buy: A Big Deal to Watch in 2013

Stocks in this article: BBY AAPL GOOG DELL RIMM

NEW YORK ( TheStreet) -- With a 'fiscal cliff' looming and reports of a lost year in holiday season retail sales, dealmakers face an uncertain outlook for 2013 after a forgettable year in mergers and aquisitions.

Still, with earnings and stock markets continuing to trend upward alongside a recovering U.S. economy there's reason for optimism that the New Year may revive animal spirits and push corporations and private equity giants into acquisitions.

Investors should watch a near half-year takeover drama for struggling electronics retailer Best Buy (BBY) as a proxy for the M&A market headed into 2013.

A possible takeover could confirm the key expected drivers of the deals market, such as private equity and access to cheap buyout or merger financing. Meanwhile, a Best Buy buyout could also signal demand for blockbuster turnaround deals, amid a handful of beaten down former blue-chips like Research In Motion (RIMM), Dell (DELL), and social media busts such as Groupon (GRPN) and Zynga (ZNGA).

Were no Best Buy deal to materialize after a takeover dance that started in early August, it could counter expectations that private equity giants will play an outsized role in M&A markets and might underscore the impact of the Fiscal Cliff and weak signs of holiday season sales on C-Suite aggression.

After Best Buy founder and former chairman Richard Schulze proposed a $24-to-$26 a share takeover of the electronics retailer - Schulze has yet to make a formal offer - Best Buy's shares have fallen sharply on two disastrous earnings reports that show cash and earnings falling, amid online market competition and a weak market for PC-based products.

After delays to a prospective takeover offer, Schulze and a still suspect consortium of private equity giants will have until February 28 to submit a real bid that could give investors and the company's management something to think over. So far TheStreet has criticized Schulze for slow playing a deal at the expense of ordinary investors .

A chronology of the Best Buy buyout drama shows why the retailer may be a leading indicator on overall M&A markets.

When Schulze first made his bid, analysts at Credit Suisse and Citigroup were skeptical he could find the debt financing or private equity interest to support what initially appeared to be a $8.8 billion bid. According to Citigroup's initial August calculations, Schulze would need $5 billion in debt financing. Meanwhile, Credit Suisse analysts estimated a takeover would need a further $4 billion in private equity support. Both pieces of a prospective Best Buy deal would near post-crisis highs in takeover financing.

In a 2013, Ernst & Young targets private equity as a bright spot for dealmakers, amid expectations of a flat to declining M&A market. "As corporates continue to be risk averse, PE firms are the ones to watch and are a potential bright spot in 2013 as the down economy provides a good time to invest," said Richard Jeanneret, the vice chair of E&Y's transaction advisory practice, in the Dec. 5 report.

In a follow up mid-December interview Jeanneret, who does not talk about specific companies or deals, said that M&A activity would likely also hinge on wider economic issues.

"I think there is a huge pent up demand and desire for deal making. If we can get some economic clarity, as well as some optimism that European Union has seen the worst then I think we can see a run in M&A," said Jeanneret, who maintained skepticism of such a scenario and cautioned a messy resolution to the Fiscal Cliff could put corporations back on the sidelines.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs