There is no doubt that 2017 will go down as one of the most remarkable years in the history of U.S. stock trading. The market touched more than 60 daily all-time highs, and the S&P 500 closed higher in every single month for the first time in history. That hot streaked has continued into the first days of the New Year, with our major indexes once again surging to new peaks in 2018.
Another trend we have also seen move into 2018 is speculation over major mergers and acquisitions. Total M&A activity was actually relatively quiet in 2017-deals were down about 35% through mid-November-but several Wall Street titans either announced major deals or found themselves at the center of deal-related rumors throughout the year.
From industry-shifting moves like Amazon's AMZN buyout of Whole Foods and CVS Health's CVS tie-up with Aetna AET, to future-focused acquisitions like Gilead's GILD purchase of CAR-T researcher Kite Pharma and Intel's INTC deal to buy computer vision firm Mobileye, 2017 had plenty of huge M&A headlines to soak in (also read: 15 of the Best Mergers & Acquisitions of 2017).
And so far in 2018, the headlines have continued. The entertainment industry is still reacting to Disney's DIS acquisition of several major 21st Century Fox FOXA assets, and giants like Apple AAPL and Netflix NFLX have already caused the rumor mill to swirl.
With this in mind, let's take a look a three huge M&A deals that might happen this year:
1. Apple (Finally) Buying Netflix
People have been arguing that Apple should use its massive cash pile to make a major media acquisition for years now, and video streaming giant Netflix is typically the first choice among speculators.
But Apple has defied these speculators time and time again, opting instead to invest in itself. Indeed, the company recently promised $1 billion to its Apple Music division for the purposes of building out original video content, and its first in-house produced shows are starting to debut now.
However, the GOP's tax reform bill, which includes a one-time allowance for companies to repatriate overseas cash, could be the catalyst needed to inspire a major Apple deal.
Earlier this week, shares of Netflix surged after a note on this very topic from Citigroup analysts emerged. The firm's Jim Suva and Asiya Merchant wrote that Apple is gearing up to make a major acquisition of a car company, video game company, or entertainment company. The analysts suggested that there is as high as a 40% likelihood of Apple acquiring Netflix soon.
But is Apple even interested in the company, or will its attention turn elsewhere?
2. Amazon Targets… Target?
As if Amazon's acquisition of Whole Foods was not enough to satisfy the retail deal rumors, the latest batch of industry whispers point to the e-commerce king going after big-box retailer Target TGT.
The rumors were sparked by Loup Venture co-founder Gene Munster, who recently published a report highlighting eight predictions for the technology industry this year.
"Target is the ideal offline partner for Amazon for two reasons, shared demographic and manageable but comprehensive store count," Munster argued. "Getting the timing on this is difficult, but seeing the value of the combination is easy."
Amazon burned a lot of its cash with its $13.7 billion purchase of Whole Foods in 2017, but if the financials work out, Target certainly makes sense within the context of the online retailer's ongoing war with Walmart WMT.
Nevertheless, another brick-and-mortar acquisition could be a lofty move for the e-commerce company, especially considering how fresh the Whole Foods deal is. Can the internet giant really adapt to traditional retail that quickly?
3. Time Warner and Comcast Snatch Hulu
As mentioned, the entertainment industry is still figuring out what to do next after Disney decided to shell out more than $50 billion in stock for many of Fox's most important assets. Disney has certainly beefed up the library for its upcoming streaming services, and ESPN's grasp on the sports world is even tighter with the acquisition of Fox Sports Regional Networks.
But one thing that remains unclear is the fate of Hulu, a budding video streaming platform co-owned by Fox, Disney, Comcast CMCSA, and Time Warner TWX. Disney bought Fox's 30% stake in the brand, giving it a controlling 60% stake, but it is unlikely that Comcast and Time Warner will give up on the promising streaming platform just yet.
Comcast still owns 30% of Hulu, and through its NBCUniversal subsidiary, it could certainly whip up a Hulu-NBC-Universal streaming service that could compete with Disney and Netflix. Teaming up with Time Warner and its HBO division could add even more firing power.
Of course, we have yet to see any indication that Disney is looking to shed its new controlling stake in Hulu, but one would imagine that it could become a bargaining tool in what is sure to be a complicated regulatory approval process.
With Netflix, Disney, and Amazon poised to be video streaming leaders in five years' time, might Comcast and Time Warner look to toss a fourth hat into the ring?