Editor's note: The Value Stock-Picking Training Program is a series of four weekly assignments. (To start with Week 1,
- Due diligence risk: The acquiring company can back out of the deal if, after doing the research, some negative information turns up. The type of negative information that can trigger the back-out is usually spelled out in the deal, but sometimes the waters can be muddy, as in the Sallie Mae deal.
- Regulatory risk: When an industry is heavily regulated, such as an electric utility or a media conglomerate, or if the merger might create an environment that triggers an antitrust situation, the government might step in and nix the deal. In the proposed Whole Foods (WFMI) and Wild Oats deal, the Federal Trade Commission filed a lawsuit claiming that natural foods was its own market and that the merger would create a monopoly. The Federal Communications Commission made a similar argument against the merger of satellite radio providers XM (XMSR) and Sirius (SIRI), claiming that satellite radio was its own market.
- Other bidders might emerge: This is not really a risk, but more of a reward. See the Oracle-BEA deal.
- Interest rate risk. If a deal like SAP-Business Objects will take six months or more to close, why tie up your money in the stock when you can sell and reinvest, at the least, in a
CDor money market fund, getting paid for waiting? Not getting paid for waiting is a definite risk.
Latest Activist Situations, which tracks SECForm 13D filings, the "footprints" activist investors leave when they are building up their positions.
T. Boone Pickens
1. On Yahoo! Finance, enter ticker symbol DHR and click the "Get Quotes" button. 2. On the left-hand side, click the "Competitors" link. According to Yahoo!, Danaher's direct competitors are Emerson Electric ( EMR), Johnson Controls ( JCI) and Rockwell Automation ( ROK).You can then research the news on these companies as well, adding them to your Stockpickr M&A portfolio. Step 5. For each stock in play, assume that you own it and note whether you want to sell or hold it. You may want to hold until a target price is reached, or you may want to set a