Fund managers eye uptick in takeovers

Leading fund managers expect the level of merger and acquisitions (M&A) activity to rise in the next 12 months, according to a survey of 200 major investment houses.

Of those interviewed by spread-betting firm Capital Spreads, 60 per cent said they believed there would be an increase in the number of takeovers among London-listed companies over the next year. Despite the recent volatility and sharp sell-off on the markets, only 8 per cent predicted a fall in M&A activity over the period.

Simon Denham, chief executive of London Capital, said the findings were "encouraging", claiming an increase in M&A activity was "usually synonymous with a healthy economy". However, he warned that "while pressure for takeover activity is set to increase, these are likely to be heavily equity financed rather than debt or cash based."

The survey also showed that the managers expect interest rates to have increased by June 2012, with 47 per cent predicting they will be raised in the first six months of 2012.

However, a quarter still believe the Bank of England will hold off until 2013 at the earliest. "These views demonstrate an underlying sense that inflation may be set to take off," Mr Denham said. "In the current economic environment it would really be quite difficult to see anyone expressing a desire for higher rates in the medium term unless inflation is expected to go ballistic."