A group of "unicorn hunters" are successfully acquiring companies without upsetting the market, according to Morgan Stanley. And their performance can turn conventional wisdom on its head. There are 19 public companies that have acquired at least two "unicorns" —private companies with a valuation above $1 billion — in the past decade, equity strategist Edward Stanley said in a note to clients Tuesday.
There are 19 public companies that have acquired at least two "unicorns" —private companies with a valuation above $1 billion — in the past decade, equity strategist Edward Stanley said in a note to clients Tuesday. This group could acquire the top 30 unicorns, or more than 800 smaller ones, using just two-times their net-debt-to-EBITDA ratio, a measure of leverage.index by 45% over the past five years.
So what's driving this outperformance that flies in the face of expectation? Morgan Stanley said these companies have a heavy bias toward technology and medical technology, two areas that outperformed the broader market between 2018 and 2022, and since coming off recent lows in 2023. But Stanley said the focus going forward should be on whether this group resumes merger and acquisition activity in coming quarters. Also important will be whether they can acquire unicorns at a reasonable price that benefits shareholders, something Stanley said has become more difficult because delayed structure raises and bridge rounds can push back valuation resets.
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