It's Time to Go Whale Hunting

Editor's note: The mergers and acquisitions market has been at a standstill for years... But according to Joel Litman, chief investment officer of our corporate affiliate Altimetry, tailwinds are building in this space today – which could offer massive opportunities for investors who get in early...

Tom Murphy had his sights set on a whale...

Murphy had built his empire by making shrewd acquisitions. Over 30 years, he'd helped turn media brand Capital Cities from a one-TV-station shop into an established player.

He was known for setting a firm price before diving into negotiations... and aggressive cost-cutting when the deal went through.

Once Murphy got hold of a company, he'd do anything he could to save cash. Sometimes, he took it to extremes – like only painting the sides of his station's buildings that could be seen from the road.

His harsh approach worked. By 1985, Murphy and Capital Cities owned seven TV stations and a dozen radio stations in big markets like Philadelphia and Houston.

They were pushing the boundaries of the Federal Communications Commission's "7-7-7" rule... which said companies could own no more than seven TV stations, seven AM radio stations, and seven FM stations.

But Murphy wasn't ready to stop. Capital Cities was still just a small fish in a giant pond.

So he set his sights on something much, much larger. And what happened next is a great example of the kind of opportunity that's shaping up today...

TV stations were small game compared with the goliaths of broadcast – the networks themselves...

While Capital Cities booked $940 million in revenue, ABC was generating $3.7 billion.

But Murphy wasn't intimidated. He saw a lot of bloat. Despite ABC's impressive revenue, it only brought in $195 million in net income... just $50 million or so more than Capital Cities.

Within a few months, Capital Cities announced it was buying ABC for $3.5 billion. One writer famously described the merger as a "minnow that swallowed the whale."

Then, Murphy got to work.

He and his team cut 1,500 staff from ABC's bloated ranks. They removed perks like a fleet of limos. And they boosted the ABC TV stations' profit margins from 30% to 50%.

Within three years, they'd paid off almost all the debt used to finance the ABC deal. The acquisition transformed Murphy into a CEO rock star.

Less than a decade later, in 1995, entertainment titan Disney bought Capital Cities/ABC for a cool $19 billion.

Murphy got his start at what would become Capital Cities back in the 1950s... when shares were worth $5.75 apiece. By the time Disney took over, shares were worth a split-adjusted $12,000 each.

That's more than a 2,000 times return. The S&P 500's return was "only" 60 times in the same period.

How Savvy Serial Acquirers Are Creating Wealth

Capital Cities is one of the best examples of the power of mergers and acquisitions (M&A)...

But it's far from the only example...

• Equipment-rental giant United Rentals (URI) has ridden M&A tailwinds to a 5,500% gain in 28 years...

• Aerospace supplier TransDigm (TDG) is up more than 15,000% in roughly two decades...

• Shares of software provider Constellation Software (CSU.TO) have climbed almost 25,000% in the same time frame...

• And famed conglomerate Danaher (DHR) has mastered the art of acquisitions... to the tune of 65,000% returns in 56 years.

Of course, this incredible upside came over the course of decades. But you don't have to wait that long to book an impressive gain.

Danaher was up almost 600% in one five-year period. TransDigm popped 787% in five years... while Constellation climbed more than 1,000%. And United Rentals' investors enjoyed a 2,800% gain in the same amount of time.

Many folks assume all acquisitions destroy value. And it's true that there are some truly terrible deals out there.

Businesses get greedy, and they get ahead of themselves. They snap up companies with no plan to integrate them. When it all falls apart, investors are left holding the bag.

But when you find a savvy strategic acquirer – one that knows what they're doing and how to get results – it can lead to some of the greatest wealth creation ever achieved.

And that brings us to today's economy – and a unique opportunity that's shaping up...

After Silicon Valley Bank and First Republic collapsed in 2023, the government effectively put the banking industry on probation. Regulators raised capital buffer requirements, and federal regulators discouraged bank consolidation.

But the Trump administration is taking a different stance. It's bringing in a wave of deregulation... speeding up merger approvals and reducing holding requirements for banks.

Falling interest rates are also making it cheaper for companies to borrow... and they're using it to finance deals.

We're already seeing these tailwinds bleed into the banking space. In September, PNC Financial Services (PNC) announced a $4.1 billion acquisition of Colorado-based FirstBank.

And in October, regional bank Fifth Third Bancorp (FITB) said it plans to buy Comerica for nearly $11 billion.

In short, this space is benefiting from some impressive tailwinds...

And it's leading to a unique opportunity – a potential "one-day double" as acquirers scramble for deals by the end of the year.

The M&A market is finally opening up after a yearslong freeze. That makes this the perfect time to find the next Capital Cities in the making... and get in on the ground floor.

Regards,

Joel Litman

Editor's note: Joel says that right now, a massive convergence of catalysts could offer you the biggest, fastest gain of 2025. And he says one stock could double your money or more in a single day before December 31... no matter what else happens to the stock market this month. But you don't have much time to make your move – the key announcement Joel is waiting for could come as early as tomorrow.