Merger Consideration Report

Over the past several decades we have watched a dramatic increase in the number of mergers and acquisitions that have taken place throughout all industries. The MAB Factor is based on a simple premise; if companies have extremely high market relative valuation scores respective to their sector counterparts, they have a higher probability to be seeking acquisitions (Hunters). They will take advantage of the premium within their stock price and acquire other less relatively valued companies. Companies with valuations that are lower relative to their sector counterparts have a higher probability of being acquired (Hunted).

Consideration for inclusion on the list is totally based on the securities relative fair value position. There may be other rational reasons why a company would or would not be a likely merger candidate.

There are two main classifications in the brief: hunters and hunted. Hunters are companies that are seeking to acquire other companies. Hunted are companies that are considered vulnerable to acquisition.
Hunters and hunted companies are grouped according to their sector. These are the 10 sectors as defined by S & P Global.

Each sector has a table that includes the following information:

  1. Ticker – commonly recognized exchange identifier.
  2. B/S – each stock is classified into one of five consideration categories:
    1. B = Buy consideration
    2. BW = Buy Watch consideration
    3. H = Hold consideration
    4. SW = Sell Watch consideration
    5. S = Sell consideration
  3. Name – commonly used name for the company
  4. Sector – one of 10 sectors as defined by S&P Global
  5. Industry – industry group as defined by S&P Global
  6. MAB = merger, acquisition buyout classification. Classifications are:
    1. A+ = the stock is in the top 5% of companies to be involved in a merger related activity.
    2. A = the stock is in the top 10% of companies to be involved in a merger related activity.
    3. B+ = the stock is in the top 15% of companies to be involved in a merger related activity.
    4. B = the stock is in the top 20% of companies to be involved in a merger related activity.
    5. C = the stock is not considered highly likely to be involved in a merger related activity.
  7. Index = respective index assigned by S&P Global.
  8. % Fair = relationship between current fair value and current price. When the current price and fair value match it is identified as 100%Fv. The number represents the percent the current price is of fair value.
  9. CMA = each stock is classified into one of three classifications:
    1. C = core, stocks that have a share price that is more stable in price variations than the market overall.
    2. M = market, stocks that have a share price that is similar in price variations to the market.

The table below is a sample of the briefing for Consumer Discretionary of Hunters & Hunted stocks.