The recent pummelling of the stock market has changed the playing field for many firms. Priced for a prolonged recession (or worse), the stock of many firms is now priced assuming an enterprise value of zero (i.e., below book value).
Such an environment is typically rife for a spate of corporate takeovers. But with stock prices down across the board, many acquirers don't have the currency of a rich valuation to pull off a good-sized corporate purchase.
Even with such a dearth of natural buyers, however, there are some potential buyers. A number of firms, including Oracle (ORCL), have dedicated pools of capital for strategic purchases. But in most cases, the targeted acquisitions are small and typically do not trade on public exchanges.
Likewise, buyout funds that have managed to avoid the problematic deals of the go-go early 2000s have the dual advantages of both a large cash stockpile and a vast selection of rock-bottom firms from which to choose. However, well positioned LBO players are hard to find in the current environment, although they certainly exist.
That leaves the relatively small number of publicly traded companies that can finance corporate acquisitions with secondary stock offerings. These secondaries (mainly from REITs and large banks) have consistently been coming to market at sizable discounts, as investors require a higher-than-normal rate of return to participate. Even so, the current valuations are so cheap that firms are more than justified to offer their stock at below-market prices.
