Analyst: Larger Companies To Buy Up The Smaller In Coming Year

The Associated Press reported that analysts predict machinery makers such as Caterpillar Inc. and Deere & Co. may become buyers of smaller companies amid a wave of consolidation after the liquidity crisis eases. Other companies that could become acquirers include Paccar Inc., Parker- Hannifin Corp. and Illinois Tool Works Inc., a JPMorgan analyst Ann Duignan wrote in an investor note.

“The process of consolidation is likely at some point after the current liquidity crisis eases and could start with small cap companies that are not well diversified and/or have stretched balance sheets,” Duignan wrote. “The machinery companies are at least $5 billion in market cap and have some ability to take on additional debt, in our view, given a reasonable net debt to total capital ratio, ratio of earnings-before- interest-and-tax to interest, or both.” ❖