Goldman Sachs Lifts Sell Rating Off Nielsen Amid M&A Potential

The bearish case for Nielsen Holdings PLC NLSN has come to an end amid expectations for the company to partake in an M&A deal that would warrant a higher valuation, according to Goldman Sachs.

The Analyst

Goldman Sachs' George Tong upgraded Nielsen Holdings from Sell to Neutral with a 12-month price target lifted from $20 to $25.

The Thesis

Expectations for Nielsen to participate in an M&A deal has become incrementally higher based on the multiple other deals seen in the sector, Tong said in a note. On Aug. 13, Elliot Management took an 8 percent stake in Nielsen and is pushing the company to sell itself.

Blackstone, CPP and GIC announced a pending $20 billion acquisition of a majority stake in Thomson Reuters' Financial & Risk segment while Dun & Bradstreet agreed to sell itself for $6.5 billion. The transactions are attractive to buyers given a healthy operating leverage and favorable working capital characteristics which by default increases the likelihood of a potential change of control for Nielsen.

A bullish stance on Nielsen's stock may not be appropriate as its 12- to 18-month outlook remains "relatively challenged." The company's clients in the Developed Buy segment are facing "anemic" organic revenue growth trends which limits demand for Nielsen's data offerings.

Price Action

Shares of Nielsen Holdings were trading higher by nearly 3 percent Thursday afternoon.

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