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FTSE boosted by takeover deal news

FTSE boosted by takeover deal news

News of confirmed and potential takeover deals have boosted the FTSE 100.

Takeover deals are back at the forefront of investors' minds today (July 29th), following news that acquisitions are set to take place involving UK firms.

Hikma, the pharmaceutical group, has purchased a US drugs company for £1.7 billion, while manufacturing business acquisition specialist Melrose revealed it is to sell portfolio company Elster for £3.3 billion.

There is also the possibility that insurance group Zurich could acquire UK competitor RSA, with shares in the latter company rising by nearly 20% on news that investors would approve a takeover attempt.

Companies are taking action to adapt

Speaking to CityAM, David Buik of Panmure Gordon explained news of the deals boosted the FTSE 100 because investors have taken it as a signal that companies are taking action to adapt to difficult market conditions.

"They need to spend less money or increase market share – so the only way to do it is to merge, which allows them to cut costs and gain a larger market share at the same time," he explained.

At the close of trading today the FTSE 100 was up 1.09% on 6,626.67 points, having yesterday ended a five-day losing streak.

GKN has also reached a deal to purchase Fokker Technologies for £500 million, while today news emerged that property company Quintain could be taken over by America’s Lone Star Funds.

A quiet period in mergers and acquisitions has ended

News of confirmed and potential takeovers has ended a quiet period in mergers and acquisitions in the UK this month. However, globally, the trend for mergers and acquisitions is on the up, especially in high growth markets.

According to KPMG's International’s latest High Growth Markets International Acquisition Tracker, there was an 11% rise in developed to high growth market deals towards the end of 2014, while high growth to developed market transactions have risen by 9%.

Global head of M&A and deal advisory at KPMG Phil Isom explained that "it has been struggling and is only just beginning to see a return to form."


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