David Sterman

Executives at chip-equipment maker Lam Research (Nasdaq: LRCX) pulled off a masterstroke this week. A decision to buy Novellus Systems (Nasdaq: NVLS) has the makings of a "home  run," according to Citigroup.

Why? Because the acquisition may boost Lam's earnings per share (EPS) by 35% in 2012, and the $44 share purchase price is well below the $60 target Novellus had reportedly been seeking. The fact that the company settled for a 25% discount tells you it's a buyer's market right now.

And that's good news for investors. Those who can find companies likely to be acquired could find themselves making quick gains as another company comes along and tries to make a deal.

Indeed, the logic behind acquisitions has rarely been so strong. Sales and EPS growth for many companies are finally set to cool in 2012 after robust gains in 2010 and 2011. So the only way to keep the top and bottom lines moving is to spend some of the massive amounts of cash that has been built up during the last few years on acquisitions. (Lam Research had $2 billion in the bank as of the end of September, for example.)

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com