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Honeywell International Inc. (HON), PepsiCo, Inc. (PEP), Sodastream International Ltd (SODA): M&A Activity Is Making Movers Out of Shakers

It seems to be a distant memory when the titans of Wall Street pulled in multi-million dollar merger and acquisition deal fees. It almost seems to be out of style. But then why are we hearing rumors of wars rumbling the Street all the way uptown through Park Avenue?

Honeywell International Inc. (NYSE:HON)The easy answer is that merger and acquisition activity is back. The first quarter of 2013 dialed in $542 billion in merger and acquisition deals, which represent a 10% increase over the first quarter of 2012. Over $128 billion of that number comes from emerging markets like Brazil. According to the S&P, investment banks have faired poorly in this increase in activity, booking first quarter fees that were 11% lower than the same quarter last year.

Leading the charge in mergers and acquisitions are the following sectors:

Sector M&A Increase (YoY)
Energy & Power 13.4%
Real Estate 13.2%
Technology 12.3%

Source: Thompson Reuters

The energy and power sector got a nice boost in merger activity through the merger of Copano Energy and Kinder Morgan. This deal is valued at around $5 billion, with Citigroup Inc (NYSE:C), Barclays PLC (ADR) (NYSE:BCS), and Jefferies as advisors.

Real estate valuations were buoyed in of 2013 by rising new home sales figures and healthy merger and acquisition activity. One such deal is General Electric’s sale of NBCUniversal’s floors in 30 Rockefeller Center and CNBC’s headquarters to Comcast Corporation (NASDAQ:CMCSA). This deal is worth $16.1 billion, and is valued as the third biggest so far in 2013.

The tech sector, a laggard in these rising markets, saw its fair share of M&A activity early on this year, with Michael Dell attempting to take his company, Dell Inc. (NASDAQ:DELL), private for over $21 billion. In a note to shareholders, the board of Dell opines,

While we continue to recommend the current Silver Lake/Michael Dell transaction, and to work toward completion of that transaction, we will also work with Blackstone, and Icahn to seek to develop a definitive alternative proposal that provides an even more compelling value proposition for Dell’s shareholders. Our goal was, and remains, to ensure that whatever transaction is consummated is the best possible outcome for Dell’s shareholders.

So what do we have to look forward to for the rest of the year?

To date, the four biggest deals on Wall Street have contributed approximately $100 billion to the 2013 aggregate deal value. That is a small drop in the bucket for the expected activity for this year. According to the IMAA Institute, announced worldwide merger and acquisition activity should venture over $2 trillion. This number is over 50% lower than 2007 levels, when the Dow Jones Industrial average topped out just over 14,000. Greater levels now should indicate a higher number of transactions and aggregate value.


Even with the numbers giving mixed messages, we have to focus on the fact that merger and acquisition activity is off to its quickest start since 2000, according to DealLogic.

Right now, companies looking to acquire or merge should be taking advantage of low financing costs. As we witness the growth in M&A activity, we can see the following:

1. Leading indicators that there is sustainable economic growth

2. Strength in the equity markets

3. Renewed corporate confidence

4. Companies are flush with cash

All of the above points are good signs for equity investors. And if we look at the current rumors surrounding future mergers and acquisitions, the news keeps getting better.

So far we hear Hulu is on the short list of targets by companies like DIRECTV (NASDAQ:DTV) and Time Warner Cable Inc (NYSE:TWC). Even AT&T is reported to have an interest in the online video-streaming site. The deal is currently at $1 billion, which is the offer DIRECTV (NASDAQ:DTV) has made, according to Bloomberg News.

Where to look for buying opportunities.

Honeywell International Inc. (NYSE:HON)’s HomMED division is reported to be looking into acquiring patient monitoring companies like ActiveCare

This small division of Honeywell International Inc. (NYSE:HON) is part of a growing trend towards active, real-time patient monitoring.

Honeywell International Inc. (NYSE:HON) HomMed provides products, software, and peripherals for telehealth and remote patient care applications. It offers, amongst other related services, a remote patient care monitor that provides Web-enabled, on-demand access to disease-specific symptom management and measures heart rate, blood pressure, and weight. The company also provides health center kiosks that enable corporate and healthcare-related facilities to monitor the health of their residents, employees, and members. In addition, it offers Sentry, a telehealth monitor that collects and transmits data on heart rate, blood pressure, oxygen saturation, temperature, and other vital signs; Genesis, a telehealth monitor that automatically prompts in-home users when it’s time to take their vital signs and accommodates multiple medical peripherals; and Central Station, a diagnostic software for managing patient care that records and tracks the information collected on a patient. The company serves patients and families, physicians, home health care clients, and senior living communities.

The Salt Lake City patient monitoring company, ActiveCare, has officially become the world’s largest provider of cellular glucometers. Their reach into the horizontally juxtaposed business to Honeywell International Inc. (NYSE:HON) HomMED is the monitoring of diabetics. They have had tremendous success in penetrating that market as the flight to self-insurance has kept small and mid-sized businesses—along with government organizations and municipalities—in constant need of keeping their claims and coverage costs low. This success is evident in ActiveCare’s bottom line, which has ballooned to a record-breaking first quarter for this company, posting $4 million in gross revenue.

The logic here is that HomMED is a small piece in a big puzzle that makes up the parent company, Honeywell International Inc. (NYSE:HON). But this small piece accounts for a move into a field of patient monitoring dominated by GE and Alere. With only $13 million in revenues for this subsidiary of Honeywell International Inc. (NYSE:HON), and a growing healthcare need for patient monitoring, it behooves HomMED to take close looks at their smaller, niche, competitors to continue their penetration into this market without missing a step or wasting time and research and development costs.

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