Merger and acquisitions activity is picking up as the economy gains momentum and could continue even through an interest rate hike. Meanwhile, exchange traded fund investors can target some areas of the market that are consolidating.
Senior MD and global head of Blackstone Advisory Partners, John Studzinski, argued that underlying factors, like wage inflation and companies’ needs to divest cash hoards, will continue to drive M&A activity, even through a Federal Reserve rate hike, reports Jenny Cosgrave for CNBC.
“Rates are low now, but they are going to go up, but not so much that it’s going to change the reason for a management team or a board to support a major strategic deal, given the amount of cash they have already on their balance sheets,” Studzinski said on CNBC.
Looking at sectors with the most inquiries for M&A advice, Studzinski pointed to tech, media and telecom sectors with “very robust” interest.
Some have already argued that tech companies could be targeting software firms with their large cash hoards. Investors may potentially capture the upside of the greater M&A activity through broad software sector ETFs, including the iShares North American Tech-Software ETF (NYSEArca: IGV), SPDR S&P Software & Services ETF (NYSEArca: XSW) and PowerShares Dynamic Software Portfolio (NYSEArca: PSJ). [Corporate Tax Reform Could Boost Tech ETFs]
For media exposure, the PowerShares Dynamic Media Portfolio (NYSEArca: PBS) tracks U.S. media companies. PBS includes a 4.9% position in Time Warner (NYSE: TWX), which experienced a huge surge last month on a merger deal with Charter Communications (NasdaqGS: CHTR), which is 2.6% of PBS.