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Who's next? Spike in merger activity leads to speculation about other combinations

Berkshire Hathaway (BRK.B) is acquiring Heinz (HNZ), American Airlines and U.S. Airways (LCC) have announced a merger worth $11 billion, and Office Depot (ODP) and Office Max (OMX), the second and third largest office supply store chains, made their rumored merger official Wednesday morning. There is no doubt that the market has entered a fresh cycle of mergers and acquisitions. No doubt we will soon hear doomsayers telling us that this, along with 100 other things, is a sign of impending market catastrophe. In this case, they cannot be faulted for noticing a correlation between M&A activity and the end of bull markets; of the last 12 years, the two biggest for M&A were 2000 and 2007. In both of those years M&A activity exceeded $1.5 trillion. Nevertheless, cycles of high M&A can last for years, so there is no reason to reach for the panic button. Besides, the possibility of a merger or acquisition makes the market a lot more interesting, particularly when the climate seems to favor hostile takeovers, as is now the case. If you happen to be sitting on the right stock at the right time, a merger is better than a gold mine, and there is nothing as exhilarating as reaping a huge, sudden windfall.

Julian Close

Julian Close became a stockbroker in 1995. In his 20 years of market experience, he has seen all market conditions and written about every aspect of investing. Julian has also written extensively on corporate best practices and even written reports for the United Nations. He graduated from Davidson College in 1993 and received a Master of Arts in Teaching from Mary Baldwin College in 2011. You can see closing trades for all Julian's long and short positions and track his long term performance via twitter: @JulianClose_MIC.