Bids last year saw share prices rise 51% on average but investing carries riskThey have been described as sitting ducks: UK-listed companies that really ought to be more highly valued and are therefore ripe for being picked off by cash-rich foreign predators.
Charles Hall, head of research at investment bank Peel Hunt, has described the 'relentless' merger and acquisition activity as a 'feeding frenzy'. 'A better plan is to focus on the key fundamentals that make any stock potentially attractive.' That way, he says, if no takeover bid transpires, you still have the potential for capital growth, income from dividends, or both.
And the prospect of interest rate cuts could also boost appetite for takeover bids by private equity barons, who finance their deals with debt. A bid for the consumer goods giant, where shares are down 21 per cent since their peak, would be a seismic event on the stock market. But as high interest rates and inflationary pressure bite, the company has again fallen on tough times.This, according to Garry White, chief investment commentator at Charles Stanley, makes it 'vulnerable to a bid'.Burberry: Value £4.3bnShare price down 55pc since peak in April 2023Shares have slumped more than 50 per cent in the past year as the famous trench coat maker falls out of fashion in the City.
Hunter noted that the country's high youth unemployment rate, low consumer confidence and beleaguered property sector have left investors spooked.Homewares chain Dunelm has seen sales fall by more than a third since the end of 2020Dunelm is also on the potential hit list as predators circle the London market looking for bargains.
The company enjoyed a temporary boom when stores reopened after lockdown. But shares have slumped by more than a third since the end of 2020. This will see profits slump for Entain which – unlike listed rival Flutter, the owner of Paddy Power – makes most of its money in Britain. Because of this long-standing legacy, Charles Stanley's White said this could make it ripe for a takeover.
Revolution Beauty, whose shares are down 84 per cent from their peak, has been branded 'very cheap' by analysts. The lender, which operates in markets such as China, Hong Kong and Singapore, is best known in Britain as the shirt sponsor of Liverpool FC. Rival Wetherspoons is booming as punters flock in for cheap pints, but rivals such as Marston's are having a much harder time.