Announced combinations indicate companies may finally put cash stockpiles to use, sparking a turnover in S&P 500 membership that could improve the index's earnings into 2021. Deal announcements have declined since 2019, but have picked up to start 4Q. The largest are Advanced Micro Devices' acquisition of Xilinx, ConocoPhillips buying Concho Resources, and Morgan Stanley purchasing Eaton Vance. Our work suggests these three transactions could increase index EPS growth at least 14 bps in 2021, all else held equal.
Over the past quarter, the average return for acquirers in the month after deals was negative 1.5%. Longer term, returns were minus 0.3%.
Over the past quarter, the average return for acquirers in the month after deals was negative 1.5%. Longer term, returns were minus 0.3%.