As of mid-February, just four or so deals were being formally pursued in the London market – two years ago, that figure was about four times higher. But rumours of the death of takeovers could be greatly exaggerated.
True, 2009 was a grim year for M&A activity, but after a slow start the situation was far from uniform throughout the year. "The frenzied pace of activity that characterised the pre-crisis deal market will not be quick to return," admits Paul Hartzell, a Merrill Corporation senior vice president, when writing in the latest report produced by M&A research unit mergermarket. "But there is no doubt that M&A is making its way back onto the corporate agenda." That's because the volume of quarterly M&A transactions increased by 13.2 per cent quarter on quarter in the last quarter of 2009 – the fastest increase in the past five years. What's more, deal valuations in the last quarter also appear to have firmed up and almost doubled to E128.8bn (£116.4bn).
There have been a few blockbuster deals, too, such as the joint venture between Rio Tinto and BHP Billiton announced in December. And, of course, we've had Kraft's drawn-out battle to snatch Cadbury, a deal that ultimately valued the confectionary maker at £11.9bn. And while we shouldn't necessarily expect a glut of huge deals to materialise, the Cadbury takeover "looks to be setting the wheels in motion that will drive M&A activity", reports Catherine Raisig of mergermarket. "Industry experts expect this deal to put pressure on smaller players who could become takeover targets, but also mid-sized players."
So, with evidence that deal-doing is at last set to get back on the agenda as 2010 continues, we have scrutinised all sectors of the stock market and identified 10 potential targets that could deliver a decent bid premium for investors – even if patience is required.
