Stock investors may look back at 2025 as the year of the takeover — one that delivered sizeable gains. “It’s going to be a big year,” Calamos Investments senior portfolio manager Brandon Nelson predicts. “A lot of stars are aligning for mergers and acquisitions.”
Nelson cites three favorable factors behind the M&A boom, including:
1. New leadership at the U.S. Federal Trade Commission (FTC): More merger-friendly Andrew Ferguson has replaced the Biden administration’s Lina Kahn, who aggressively challenged takeovers.
“With the new [Trump] administration, and specifically the FTC change, conditions can only get less hostile,” Nelson said. “There is a lot of pent-up demand.”
That demand is already showing up. Nelson points to proposed takeovers in the past few weeks of Intra-Cellular Therapies ITCI, Inari Medical NARI, Accolade ACCD and H&E Equipment Services HEES. Those takeover announcements produced instant 50% to 100% shareholder gains. This is just the beginning, Nelson says.
2. ‘Animal spirits’ are on the rise: Corporate management teams are hungrier for acquisitions, Harbor Capital Advisors portfolio manager Justin Menne says. Menne points out that business confidence is rising because of ongoing economic strength and prospects for deregulation under the Trump administration. He says the increase in investment-banking fees revealed in recent earnings news from JPMorgan Chase JPM, Goldman Sachs GS and Morgan Stanley MS is a sign that dealmaking is already picking up.
3. Credit conditions are easing: It’s getting easier for companies to borrow to do deals, says Andy Wells, chief investment officer of investment manager SanJac Alpha. Wells points to a Fed measure of supply and demand for commercial and industrial loans, which shows the net percentage of lenders tightening loan standards at zero.
5 potential takeover targets
Here are five companies that may get bought out. The key here is that investors say these names should do well even without takeover bids. That’s important, because betting on takeover action alone is highly speculative.
1. Instacart: Motley Fool senior investment analyst Emily Flippen says this grocery-delivery company would be a great fit with Walmart WMT, where it could handle back-end grocery delivery. “Walmart has a propensity to make these synergistic deals,” she says. For example, Walmart made a big investment in the e-commerce company Flipkart to complement its retail business in India. But even without a buyout, she thinks Instacart CART shares will perform well since it is expanding profit margins and produces solid free cash flow that investors have not fully priced into the stock.
2. Roku: Roku ROKU offers devices that allow households to stream content on their TVs. It generates revenue from ad sales and streaming-service distribution fees. The service is increasingly popular; Roku was in 85.5 million households as of September 2024, up 13% from the year before. “Roku has figured out a way to interact with customers in ways that are not intrusive, and the customer is fine with it,” says Wells at SanJac Alpha. He thinks this could make Roku attractive to Walmart, which wants to expand in home entertainment and streaming to compete against Amazon AMZN. “Roku has an amazing consumer-engagement profile,” Wells says. “Whether they get acquired or not, I really like them. They have an extremely durable consumer base.”
3. Viking Therapeutics: Weight-loss drugs are now on the short list of drugs subject to Medicare price negotiations under the Inflation Reduction Act. The shares of upstart weight-loss-drug developer Viking Therapeutics VKTX are down as a result, which makes it an attractive buyout candidate. “The only reason they have not been acquired was the potential for antitrust scrutiny,” Wells says. Absent a takeover, he adds, the company could do well because of the strength of its drug pipeline.
4. ADMA Biologics: ADMA Biologics ADMA sells plasma-based products that contain antibodies which help prevent infections in patients with weak immune systems. Revenue growth is strong — especially for the lead product, Asceniv — and margins are improving. The company could post $480 million in sales this year compared to $258 million in 2023, says Nelson, the Calamos portfolio manager. “They’ve got a lot of momentum in the business, and that is something acquiring companies look for,” Nelson adds. But even without a buyout, the company’s growth should make the stock outperform.
5. Rush Street Interactive: Online-gaming companies are seeing spectacular sales growth. Rush Street Interactive RSI stands out in the space because it has figured out how to keep customers engaged with rewards and special bonuses. It also looks attractive because it gets two-thirds of its revenue from casino games, where the take is more predictable and margins are higher compared to sports betting. It offers international exposure to Colombia, Mexico and Peru. These qualities might make it attractive to a bigger gaming company, Nelson says. But even without a buyout, he adds, the company and its stock should outperform.
Three M&A investing tips
As you consider potential M&A targets as part of your investment strategy, here are some tips to keep in mind:
1. Don’t chase stocks that go up a lot because the financial media publish takeover rumors. The news could be a head fake, or the ultimate price might be lower than what you expect, Nelson says. “I don’t think those are investible moments because you can get whipsawed,” he says.
2. If you own a stock that goes up a lot on takeover news, it normally makes sense to sell right away. Bidding wars are rare. Stocks typically do trade a bit below the offered takeover price before deals are finalized, but waiting several months for the last few percentage points doesn’t make sense because of the opportunity cost. “I typically have higher expectations and redeploy the capital for better return on investment,” says Nelson. Besides, the deal could fall through.
3. M&A-specific ETFs including NYLI Merger Arbitrage MNA, AltShares Merger Arbitrage ARB and First Trust Merger Arbitrage MARB might seem like good ways to benefit from merger-related stock gains because they have the word “merger” in their names. But these funds use arbitrage strategies to try to exploit stock-price discrepancies after mergers are announced — so they miss the big gains on deal news. Moreover, all of these ETFs have underperformed their event-driven fund category in most of the years they have existed, according to investment researcher Morningstar.
