Merger mania: FTSE 250 hits new record on takeover boom

Theresa May’s claim that Britain remains “open for business” despite Brexit has been considerably boosted by the latest M&A activity figures, said Deirdre Hipwell in The Times. According to Dealogic, “Britain is on track to record nearly $70bn worth of deals in the first quarter, smashing last year’s total”. News of more action this week – a takeover battle for Bovis Homes in the construction sector, and consolidation in the oil services sector – sent the domestically focused FTSE 250 index to a new record close. J.P. Morgan’s Ed Byers said the appetite for deals was growing in line with “corporate confidence” – aided by high equity valuations, which have given companies greater flexibility to finance deals, and cheap debt. Expect “a further surge in activity”.

It all sounds very bullish, but what’s really behind this latest wave of takeovers, asked Jim Armitage in the London Evening Standard. Briefly summarised: cost-cutting and “opportunistic” attacks on lame ducks. That’s certainly the case with housebuilder Bovis, which “has been run shockingly badly and is lacking a chief executive – never a good look”. The offers it has received from rivals Redrow (kicked out) and Galliford Try (still ongoing) are “transparent efforts” to get Bovis’s 25,000 plots of land in southern England “cheekily cheap”.

The second big move of the week – Aberdeenbased Wood Group’s £2.23bn deal to buy its ailing competitor Amec – has a cautionary tale behind it, said Nils Pratley in The Guardian. Amec would never have got itself into such a vulnerable state had it not made a “transformational” acquisition of its own in 2014. It splashed out nearly £2bn for the US group Foster Wheeler, resulting in mostly “a pile of trouble” and “towering debts”. Fingers crossed for Wood Group that “the curse isn’t inherited”.