Mergers and Acquisitions

Good morning,


Especially in the UK, mergers and acquisitions (M&A) so far has been the only aspect of this current bull run in the stock markets that we haven't really seen too much of. In fact, the Canadian government even reprimanded large industry leaders in Canada recently for allowing their companies to sit on what is estimated to be well over $200 billion of free cash.


The recent failed takeover of Astrazeneca by Pfizer is a clear illustration of how M&A (in the UK in particular) has become a bit of a sore subject. There's at least one analyst every one to two weeks saying that these companies need to get on with some hard buying within their respective industries and there are many sectors where I think a sudden increase in this sector looks very likely:


The supermarkets are in my eyes looking very overcrowded at the present time and I wouldn't be surprised at all if a takeover attempt is made here. The logical takeover in my opinion would be for Tesco, which has been really struggling recently, to make a bid for Morrisons. Morrisons and Tesco have both returned -22% and -19% respectively over five years, while other supermarkets like Sainsbury's has returned only -2% over five years.


This stark contrast is hardly surprising, as when you enter a Sainsbury it's always full of people - the same can't be said for Tesco or Mossisons however. It seems to me that the likes of Tesco and Morrisons have simply forgotten the mantra "The Customer is King" - something that in any business that actually involves people is essential for making any profit.


I'm expecting a big push in M&A as the bull run comes to the end - good luck guys!


The Masked AIM Trader