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Bold M&A Predictions for 2022

2021 saw its fair share of monumental mergers and acquisitions, and this streak could easily continue in 2022. In this segment of Backstage Pass recorded on Dec. 17, Fool contributors Jason Hall, Toby Bordelon, Travis Hoium, Lou Whiteman, and Rachel Warren discuss their biggest and most outrageous predictions for 2022.

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Jason Hall: I'm going to burst your bubble, because Etsy (NASDAQ: ETSY) and Pinterest (NYSE: PINS) are going to merge, that's my big prediction.

Toby Bordelon: You think Etsy and Pinterest are going to merge.

Jason Hall: Yeah.

Toby Bordelon: Everybody wants Pinterest, why does everyone want Pinterest? [laughs] Everybody wants Pinterest.

Lou Whiteman: I think you said they were for sale.

Toby Bordelon: I guess, there you go. [laughs]

Jason Hall: Obviously they have big shareholders they want to sell. Lou is 100% right.

Toby Bordelon: Let's go to Jason next, what's your deal real quick Jason?

Jason Hall: That's it, I'm going to say that I'm also going to make a prediction. I'm probably going to be wrong but I'm not 100 percent convinced that the Nvidia and Arm deal is not going to happen. I wonder if they can't find a way to make it work.

Toby Bordelon: Interesting. That was one of our honorable mentions we didn't get to.

Jason Hall: This is petering-out. Masayoshi Son is going to figure out a way because he wants that money, because he wants to buy all the other AI companies.

Toby Bordelon: Fascinating. I want some drama to continue because I don't want to give up on that just yet.

Jason Hall: It's so fun to talk about.

Toby Bordelon: What you got for us, Lou?

Lou Whiteman: I think all the ingredients are right for more. It was a great year this year for M&A, but we're late-stage capitalism and a lot of industries, they're searching for growth.

Money is only going to get more expensive in the years to come. I think we're going to have a huge M&A year next year. I'll go we talked about breakups and we talked about all these things going on.

United Technologies, GE, a lot of these industrials. There is a company sitting in the Fool Universe and Stock Advisor that makes snowmobiles, military helicopters, golf carts, and a lot of other things that don't fit to get, business jets, Textron.

Textron is the guy in the corner of the room saying, "I hope nobody sees me." [laughs] They even need to get that stock price going or there's going to be an activist telling them what they can do with some of these units. I bet you they jump the gun and they figure out a way to get at least one of these businesses gone in 2022.

Toby Bordelon: This has been off since this happens. Travis.

Travis Hoium: I was going to go with Square [now called Block] and Twitter, [laughs] but after Dorsey left, I don't think that happens until 2023. So I'll put that on the back-burner until then. The one that I have, my stock of the year this year that I picked in January was General Motors and the thesis behind that was Cruise, the autonomous driving company.

Cruise is actually operating in San Francisco now, taking commercial customers on autonomous rides. I think that continues and I think that that is spun out into its own public company in 2022. Here's my bold prediction. I think this is going to be a $100 billion plus company as a public company by the end of next year.

This is the completion of GM, basically modularizing itself in becoming a contract manufacturer and basically a finance arm for Cruise who will be its own public company by the end of the year.

Lou Whiteman: Cruise has only sold a couple of cars fewer than Rivian and they are at a $100 billion, so there you go.[laughs]

Travis Hoium: Well, they're not selling cars.

Lou Whiteman: I know. I know I'm being facetious, sorry.

Travis Hoium: But they are testing their origin vehicle which I believe should be on the road by the end of this year.

The reason that I pick this is because you mentioned Rivian, typically these IPOs happen before you actually show that you can do the thing you're saying you're going to do so that you can project exponential growth forever.

Toby Bordelon: I would be interested in Cruise if it was an independent company.

Travis Hoium: Absolutely.

Toby Bordelon: I mentioned looking at that. I think a lot of people would. Mine that I thought about going with me on this guys. Hear me out. Peloton merging with Garmin.

Jason Hall: I love that.

Toby Bordelon: You take your indoor exercise combine it with your outdoor exercise and you've got everywhere you want to exercise, there is Peloton. I think that could be a good deal for both companies.

I think there's a lot of cross-selling there. Peloton tried to do some outdoor exercise stuff, which is just not really any good. It would be good. That would be interesting to me. I would like to see that happen.

Lou Whiteman: Who is the instigator there.

Toby Bordelon: That's a good question. I feel like it's probably Garmin.

Lou Whiteman: I feel for Peloton.

Travis Hoium: I love that it takes the data ties between those companies to be really fascinating.

Toby Bordelon: They both have a of data.

Travis Hoium: I watch my Peloton sitting right here. I would love to have that information talk to each other in some sort of way.

Jason Hall: What if Ryan Reynolds were to buy Peloton?

Lou Whiteman: There we go.

Rachel Warren: Oh yeah.

Toby Bordelon: That would be fascinating.

Jason Hall: Maybe this whole thing has been a ruse by him to drive down the price so he can sneak in and make a mega deal.

Lou Whiteman: I think people are overthinking on Peloton. What happens is--

Jason Hall: That's not legitimate.

Lou Whiteman: Well no, we all want to look like Ryan Reynolds too, but what happens, the equipment cycle is we see the picture of the person on the box, we want to look like that, we don't end up looking like that, we don't blame ourselves, we blame the equipment. That happened to Peloton and it happens to all these things.

That is the missing link on all of these things, why the equipment never works is because they have to market it with beautiful people [laughs] and then it doesn't work out that way for most of us. I really believe that. It's actually that simple. I don't know how you come back from that.

Travis Hoium: I have a Peloton. I don't use it as much as I should. I really think that this is a different kind of a business than Nautica back in the day. There's just so much more to it today. I ride the bike, my wife does the yoga videos and some of the strength stuff. Now they're getting into running things so we can use it outside.

I just think there's a lot more to Peloton, we just don't know exactly what it's going to look like in five years. There's so many ups and downs in this hardware business, which is what we've seen in 2021.

That's the challenge when your revenue is all over the place and you're not fully established on what your subscription business is going to be long-term. That's where investors stop seeing the exponential growth and start asking questions and they didn't have great answers this year.

Toby Bordelon: Wherever they go, I think an acquisition at some point is probably going to be in their future. That's my guess.

Jason Hall owns Block, Inc., Etsy, Nvidia, Peloton Interactive, and Pinterest. Lou Whiteman owns Etsy. Rachel Warren owns Etsy. Toby Bordelon owns Block, Inc. and has the following options: short February 2022 $40 puts on Peloton Interactive and short January 2022 $42 puts on Pinterest. Travis Hoium owns Block, Inc., General Motors, and Peloton Interactive. The Motley Fool owns and recommends Block, Inc., Etsy, Nvidia, Peloton Interactive, Pinterest, and Twitter. The Motley Fool recommends Garmin and Textron. The Motley Fool has a disclosure policy.


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