Vickesh Mistry is senior modelling specialist at S&P Capital IQ
Mergers and acquisitions: expert view
Adrian Lowcock, senior investment manager, Hargreaves Lansdown:
“M&A activity has been subdued since the financial crisis. However, there are signs this is changing. Fund managers we have spoken to are seeing a change in sentiment among businesses as confidence returns and M&A activity is set for a strong 2014.
“The potential to benefit from an extra return on your investment will appeal to investors and a return of M&A activity is good news. However, trying to pick the next takeover target is not easy and this is where a fund manager can help.
“Certain managers are more likely to benefit than others. Those who invest in turnaround situations and managers who invest in undervalued businesses are most likely to benefit from an increase in takeovers.”
Lowcock’s fund picks
This is a theme investors can access as there are several funds and investment strategies that benefit from M&A activity, says Mr Lowcock.
M&G Recovery –Tom Dobell
M&A activity has historically been beneficial for the fund. Given the focus on undervalued recovery companies the fund is well positioned to benefit from an increase in M&A activity.
However, investors should only consider this fund for the medium to longer term because the manager is typically investing in companies for roughly five to seven years.
Old Mutual UK Alpha - Richard Buxton
This fund has been a beneficiary of M&A in the past 10 years, with an average of 8 per cent of the portfolio being subject to a takeover or merger, according to research by Hargreaves Lansdown.
Ashton Bradbury, head of equities at Old Mutual, believes that there will be more shareholder-friendly action in the next 12 months, be it good dividend growth, special dividends or M&A.
