How to get a slice of the action
Billions have been paid out to investors following flotations and takeovers. Who's next on the list? By Brian Tora
Saturday 28 October 1995
Billions have been paid out. Where has all this money come from? More importantly, how do you grab a slice of the action?
Takeover activity has come principally from banks, building societies and the privatised electricity companies. Cheltenham & Gloucester and National & Provincial are big societies that have fallen to bigger predators. Societies have members. The members agreed to the takeover. The members reap the benefits.
Deposit-holders with these societies before the takeover announcements will have received a bonus based on how much is on deposit and how long they have been with the society. Mortgage- holders, too, can benefit. Building societies, after all, were formed to let people club together, those with surplus cash giving those needing it the chance to buy a house.
Societies have had to change the rules for taking on depositors because of the rush of investors seeking to open new accounts in case a takeover occurs. Yet it was only a decade ago that Abbey National, then the second- largest building society, turned itself into a bank. Before then no one thought that owning a building society share was a way of making a quick buck.
The biggest bonus to building society depositors will be the flotation of Britain's premier building society, Halifax. It announced its intention to go to the stock market as it swallowed the smaller Leeds. This flotation will give many depositors shares in the new bank. Those who wish can sell their holdings to receive a cash benefit.
Flotations may give some of the best opportunities in the future. Recently Norwich Union announced that it would abandon mutual status to become a fully listed public company. Mutual insurance companies are like building societies. They have owner-members. If they decide to opt for a stock market quote, then it is the members who receive the shares, which they can buy and sell. It is not difficult to see why Norwich Union is taking this route. Life assurance has been a difficult market recently. Consolidation has taken place in the industry and more is expected. If Norwich Union wishes to compete on the European stage, it needs access to the stock market to raise money. Issuing its own shares for acquisitions may prove a simpler way of mopping up smaller rivals.
There is still time to benefit from the flotation of Norwich Union, although caution is advised. Policy-holders will benefit and as the plans have not yet been announced, even those who take out a policy today may have a chance to see an extra return on their investment.
But take care! The deal may not go ahead. And if it does, you must remember that the penalties for taking out a life policy and surrendering early are considerable. Also, not every policy-holder will be eligible for shares in the newly floated Norwich Union. With-profits holders should, but unit-linked investors may be excluded.
What Norwich Union is considering, others could soon adopt. Standard Life is the largest mutual assurance company in Europe. Based in Scotland, it enjoys, with Norwich Union, a strong brand image and a good reputation. But the life assurance industry has its problems. According to the latest Bacon & Woodrow survey, some 43 per cent of companies have an expense ratio which places their very existence in danger.
Of course, many smaller mutual companies may provide fruitful pickings for those wanting to be a policy-holder in next year's takeover target. For my mind, though, there are less risky ways of joining the takeover trail. Quoted life assurance companies may themselves come under the hammer. And banks, too.
The Lloyds bid for TSB is just one of a series of moves that could well see Britain's banking industry consolidated into fewer, more powerful groupings. Royal Bank of Scotland is a possible takeover target. Activity need not, however, be confined to domestic mergers. We could well see a growing Europeanisation of the retail market, just as investment banking has become a cross-border business with Deutsche Bank owning Morgan Grenfell, Dresdner buying Kleinworts and Swiss Bank Corporation absorbing Warburgs.
Do not forget utilities. Many of those who acquired electricity company shares when floated have made four times their money through takeovers. Interestingly, many City analysts initially thought the water companies would excite the bidders' interest, but it seems that a greater fear of government intervention deterred buyers.
We may yet see some consolidation in this sector, though. The capital spending needed to bring the water and sewerage pipe network up to date is considerable. Some economies of scale might be justified by greater resources.
Remember one golden rule. City professionals will tell you that profits from a takeover should be a bonus.You should buy on the merits of that share or life assurance policy alone. If, as a result of a subsequent takeover or flotation you benefit, then so much the better.
21 August 2015 10:00 PM
Rents in England and Wales rose by 1.9 per cent in July to an average of £804
21 August 2015 10:00 PM
The returns from P2P providers look more attractive than ever
21 August 2015 10:00 PM
The company failed to provide our reader's flight ticket - or a refund
14 August 2015 10:00 PM
12 August 2015 11:28 AM
Unhappy customers have been given their own Ombudsman to help fight for them.
14 August 2015 10:00 PM
An interest-free loan far outweighs the value of any of the bank's incentives
Questions of Cash: 'A connecting Vueling flight was cancelled and all my travel costs were left hanging in the air'
14 August 2015 11:30 PM
Our reader encountered problems when flying from London to Ibiza in May to take part in a charity ride
Interest rates stay at 0.5% for now - but don't wait to get a better deal on your savings and mortgage
06 August 2015 01:49 PM
The years of ultra-low rates are coming to an end
Fraudsters are bombarding older people with dangerous pension scams: here we reveal the warning signs
07 August 2015 09:07 AM
Many people are being repeatedly targeted by crooked schemes
08 August 2015 12:00 AM
It may be a great talking point when you get your football club plastic out in front of your mates, but these deals aren't the best option for all fans
08 August 2015 12:00 AM
Banks are boosting their profits by millions of pounds through consumer confusion
Questions of Cash: Iberia damaged my suitcase, told me to buy a new one - and then lost the cheque in the post
08 August 2015 12:00 AM
The customer purchased a replacement for €89 but has not received the refund over three months later
31 July 2015 10:00 PM
Swim against the tide: a country in the midst of a financial crisis, like Greece, may offer investment opportunities
31 July 2015 10:00 PM
05 August 2015 09:29 AM
Millions lose out because they don't understand the charges and fees on bank accounts
Investors told to travel the world in the search for higher returns
Is having individual billionaires good or bad for a country's economy?
Peer-to-peer lending rates put Nisas to shame
The most expensive cities in the world 2015
Is there a connection between luxury student accommodation and high levels of debt?
- 1 Game of Thrones season 6: Jon Snow theorists believe Ned Stark's son may have a twin sister
- 2 Artist takes LSD, draws herself over different stages of the 9-hour trip to show its effects
- 3 Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
- 4 A pint of water every day is the key to losing weight, scientists say
- 5 How the NHS is being dismantled in 10 easy steps
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
Stock up on canned food for stock market crash, warns former Gordon Brown adviser
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.