by Phil Doel
21. July 2010 11:03
We have for some time being saying that the better quality companies have been very successful in strengthening their balance sheets since the worst of the credit crunch and deep recession.
In the last few weeks we have seen this balance sheet strength being put to work through a series of takeovers. Today (21 July) saw the announcement of a £2.5 billion deal whereby household products group Reckitt Benckiser is set to acquire SSL, the maker of Durex and Scholl footcare products. The F&C UK Equity Fund is a clear beneficiary of this move as SSL has been a long-term core holding.
This follows fast on the heels of the bidding war which saw power systems group Chloride agreeing to be acquired by Emerson Electric for £997m. Elsewhere the discussions between International Power and France’s GDF Suez seem to be back on, while BP has struck a £4.6 billion deal with Apache of the US for the sale of gas assets.
What this seems to demonstrate is a degree of confidence in the global economic outlook amongst companies across a range of industries but also a recognition that organic growth is hard to achieve. It also underpins our view that many companies remain attractively valued and we expect the increased level of M&A activity to continue.
