There has been an uptick in takeover activity among companies on my watchlist, a trend I strongly expect to be a theme throughout this year.
In the past six weeks, Crestchic (LOAD:398p), a manufacturer of load banks that is riding the boom in data centres, received a recommended 401p-a-share cash offer from Aggreko, a global supplier of mobile and modular power, temperature control equipment and energy services. The offer is pitched well above the 350p target price I outlined in my last analysis at 272p (‘Riding a strong upgrade cycle’, IC, 29 September 2022), and realises a 220 per cent gain on my entry point ('Alpha Research: A high-growth play on the battery storage boom’, 7 September 2021). It seems a fair price, equating to just shy of 15 times 2023 analysts’ earnings estimates. The bid explains why shares in small-cap closed end fund Rockwood Strategic (RKW:1,785p) have surged 24 per cent since my last buy call (‘On the hunt for small cap value plays’, 23 November 2022); the company’s holding in Crestchic is now worth £13.6mn of its net asset value of £46mn (1,810p), a healthy sum to recycle into new investment opportunities.
In addition, K3 Capital (K3C:343p), a professional services group that is benefiting from an uptick in its corporate retructuring and tax advisory activities and one with a bumper pipeline of M&A transactions for SME business owners, has attracted a 350p-a-share cash offer from private equity firm Sun European Partners. Pitched on an exit multiple of 16.8 times 2023 earnings estimates and well above my 325p target price, I recommend banking the quick-fire 38 per cent paper profit, having only initiated coverage last autumn (Alpha Research: ‘Making the most of the UK restructuring challenge’, 27 October 2022).