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Louis Chenevert

M&A pickup among U.S. conglomerates may be undercut by prices

When United Technologies Corp paid more than $16 billion to buy plane parts-maker Goodrich Corp about two years ago, the U.S. conglomerate's biggest-ever takeover raised some eyebrows for its rich valuation.But that is nothing compared to what a buyer would need to cough up today for Rockwell Collins Inc , a similar airplane components maker deemed by Morningstar to be one of the most likely takeout candidates in the industrials sector.While United Tech paid 12.4 times Goodrich's trailing operating earnings at the time, according to Thomson Reuters data, Rockwell's shares now trade at about that level, without any deal premium baked into the price. Takeout premiums among industrials companies averaged about 25 percent last year.Such is the dilemma facing United Tech, 3M Co , Honeywell International and other diversified manufacturers that are eager to bolster their businesses through deals and yet may hesitate as the rising stock market drives prices higher."There are a lot of companie...

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