article , video 05-18-2016

Is M&A in Small-Caps Accelerating?

Portfolio Manager Bill Hench discusses the increase in M&A activity within small-cap and his outlook for this trend.

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Is M&A in Small-Caps Accelerating?

M&A activity has picked up. I don't know if it signals a new trend but I do think it really gives a lot of proof to what we're thinking, which is that things are very, very undervalued.

Growth is very hard to come by, so if you're a bigger company and you're looking to keep up a growth rate or if you're looking to expand your businesses in any way, not just domestically or overseas but any way at all, the best way to do it is to buy something right now.

Prices are cheap. The companies that you're buying tend to have really, really good balance sheets. A lot of the ugly work has been done about restructuring.

So you're buying things that have great margin outlooks, great balance sheets and you're getting them at a great price. Will that lead to more M&A? I really think it will, especially in the small cap area.

Important Disclosure Information

The thoughts and opinions expressed in the video are solely those of the person speaking as of April 12, 2016 and may differ from those of other Royce investment professionals, or the firm as a whole. There can be no assurance with regard to future market movements.

This material is not authorized for distribution unless preceded or accompanied by a current prospectus. Please read the prospectus carefully before investing or sending money. Smaller-cap stocks may involve considerably more risk than larger-cap stocks. (Please see "Primary Risks for Fund Investors" in the prospectus.)

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