How the Dow Wins From Mergers and Acquisitions

The members of the Dow Jones Industrials include a couple of direct beneficiaries from the M&A trend.

May 29, 2014 at 4:30PM

The Dow Jones Industrials (DJINDICES:^DJI) bounced back from yesterday's minor losses, climbing more than 65 points on Thursday, and returning to within 20 points of an all-time closing record. One of the things that has helped propel the broader stock market higher is the wave of merger and acquisition activity. Not only are big buyout bids raising the share prices of the stocks involved in those mergers, they're also bolstering the prospects for Dow components Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM), as well as former Dow member Bank of America (NYSE:BAC) and other big Wall Street players.


Investors know quite well that a buyout bid often involves paying a huge premium to the prevailing share price on the open market. Part of the reason for paying more than the market price is that a full takeover of a company is worth more than just buying a passive minority stake, which is what the vast majority of individual shareholders own and, therefore, what drives the current share price on the stock exchange. But in many cases, a combination actually does offer the chance to unlock cost savings, and realize potential that's unattainable separately.

Where Goldman Sachs, JPMorgan Chase, and Bank of America come in is in advising the companies involved in a deal, with the opportunity to help would-be buyers decide whether or not a particular acquisition is a good match. They also help would-be target companies assess whether an offer from a prospective buyer is fair and represents the full value of the company. According to information from Thomson Reuters, Goldman Sachs has been the leader in global merger and acquisition advisory services, with the Wall Street giant having advised on almost $600 billion in deals so far in 2014. Bank of America is in third place at just over $500 billion, and JPMorgan Chase is also among the top five companies in the mix.


Moreover, the long-term benefits of advising on business combinations can also drive future business for Goldman, JPMorgan, Bank of America, and other M&A advisors. Once a financial firm knows a company's business model intimately, it puts them in a much stronger position to advise them on other major financial moves, such as spinoffs, major asset sales, securities offerings, and future mergers and acquisitions.

The financial industry has been under pressure recently to make the most of a tough environment for interest rates and proprietary trading activity alike. M&A could be the saving for grace for Dow components JPMorgan Chase and Goldman Sachs, and their influence could help the entire Dow Jones Industrials benefit from the mergers and acquisitions trend.

Big banking's little $20.8 trillion secret
There's a brand-new company that's revolutionizing banking, and is poised to kill the hated traditional brick-and-mortar banks. That's bad for them, but great for investors. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. To learn about about this company, click here to access our new special free report.

Dan Caplinger owns shares of Bank of America and JPMorgan Chase. The Motley Fool recommends Bank of America and Goldman Sachs. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers