M&A activity to pick up in 2010, says S&P
Share
Mergers and acquisition activity is likely to pick up significantly as Britain-listed companies become targets for overseas buyers, according to Standard & Poor’s Fund Services.
In its latest update of the British growth sector, the group says this is mainly owing to the weak pound.
“It is perhaps unsurprising to find managers looking to companies not dependent on local economic recovery”
Daniel Vaughan, a fund analyst, says the fund managers interviewed expect companies with good balance sheets, and who are market leaders in their sector, to be targeted.
Fund managers are also looking towards the potential effect of the general election. Vaughan says fund managers widely expect a cut in public spending after the election, regardless of the result. However, he says, there is uncertainty around where the impact will be felt.
As concerns over Britain’s economy are receding managers generally see a return to a stockpickers market.
According to S&P Fund Service’s findings, managers have been reviewing their portfolios in this light, especially those companies that are exposed to government spending. Controversially, Vaughan says, the sell-off of companies in danger of losing government business in the wake of funding cuts has created opportunities. (article continues below)
The survey also found that mangers continue to favour companies with overseas earnings streams.
“Given the problem with the UK economy, it is perhaps unsurprising to find all managers looking to companies that are not dependent on local economic recovery,” the report says. Over 40% of companies in the Hoare Govett Smaller Companies index, the benchmark for nearly all smaller companies funds, derive at least a proportion of their earnings from overseas.
