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Mid caps are the targets for takeovers

Cheap international financing will boost M&A activity

The mid-cap sector stands to benefit most from a surge in takeover bids, says Rensburg UK mid cap growth manager Leigh Himsworth.

He says that since Japanese and European companies are able to finance bids easily through bond debt and with private equity firms awash with cash, the likelihood is that takeovers will continue in the mid-cap sector because it contains so many afford- able bid targets.

One of his stocks, North- gate Vans, was approached rec- ently by a private equity firm which could not come to a price agreement and pulled out rather than go hostile. Himsworth says it is only a matter of time before investors in private equity funds demand that their money is spent.

His fund is also heavily involved in the aerospace sector, buying UK-based suppliers with preferred-supplier status with the UK and US defence departments. Meggitt, VT group and Ultra Electronics are attractive businesses, says Himsworth, because they are well capitalised companies of the size that make them attractive to takeover bids by bigger US companies such as Lockheed.

Himsworth says: “People have been saying, get out of mid-caps and into blue chips for some time but many of the stocks now stand to ben- efit from the cheap financing of takeover deals available internationally.”

Direction Financial Planning principal Darren Baker says: “I am a believer in efficient markets so if mid-caps are the next big thing, then the market will have already priced that in. If a client’s portfolio is underexposed to mid-caps, then we would get the asset allocation right but saying a particular stock or fund or country is up and coming is trying to predict the future.”


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A sense of release

It is up to providers and journalists to tell the public how lifetime loans work

Cricket - thumbnail

England vs Australia: pensions

Well, the cricket season is here, and England and Australia are stepping up to the wicket. Although we compete with each other in the sporting world, when it comes to pensions, Australia’s pension programme is held up as a model for our auto-enrolment initiative. Auto-enrolment was introduced because people weren’t saving enough into their pensions, and it is still early days but signs are positive. However, in Australia, saving into a pension is compulsory, and in fact employers are the ones who have to pay in. Employees in Australia can make additional contributions into their pensions, but they don’t have to. Should the onus be on the employer or employee to save? Well in the UK we think it’s both, but to get ‘adequate’ savings for retirement it’s the employee who has to pay more in.


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