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UK Takeovers - Not so bad after all.............

SOURCE - FT 6th August

LEX COLUMN

There is no harm in looking. The number of UK companies under offer, as defined by the Takeover Panel, has risen almost 20 per cent since last year. According to the Panel, there were 68 companies in an offer period at the end of July, compared with 58 in 2007. This snapshot is in line with monthly averages. So far this year, there have been 68 companies under offer each month on average, compared with monthly averages of 58 in both 2006 and 2007. Given that takeovers are often seen as cyclical and likely to decline in number when equities enter bear market territory and the cost of debt rises, this seems counter-intuitive. The data is likely to indicate a rise in the number of opportunistic overtures that trigger an announcement along the lines of "we are in talks which may or may not lead to an offer". Of course, some late-blooming but slow-moving dialogues may be by now all but dead, with the market awaiting a definitive "no intention to bid" statement. Even if concrete offers will often fail to materialise, all the talk suggests activity levels are more resilient than many would expect at this point in the cycle and confidence levels are higher than doom-mongerers imagine.

Two factors may be at work. First, currency movements have made UK targets, already de-rated, more attractive: foreign bidders, such as Santander targeting Alliance & Leicester, may be tempted by sterling's 12 per cent trade-weighted fall in the past 12 months. Second, for the first time in years, trade buyers can now contemplate defensive mergers and transformational moves without fear of being outbid by private equity groups and left flailing around for Plan B. Pushing deals over the finish line is harder than it was - many transactions (see BHP Billiton-Rio Tinto) now have llama-like gestation periods - but chief executives are still trying.