This talk of mergers is a shot in the arm for UK markets

Kraft’s £10.2bn bid for Cadbury and the proposed 50:50 joint venture between T-Mobile and Orange could spark a revival in the previously depressed UK mergers and acquisitions market, according to some City analysts.

The US food company’s rejected approach for the confectioner and the proposal to form the UK’s biggest mobile phone operator could prompt a fresh wave of corporate activity in the UK, where companies are currently valued cheaper than their global sector peers.

In a research note, investment bank Citi says a combination of an improving global economy, attractive valuations of UK equities and the pressure on chief executives to deliver growth acquisition means UK companies offer “a solution of growth at a reasonable price”.

“UK equities trade on a discount to global equities. Many UK stocks have decent exposure to higher growth rates in emerging markets and may be seen by big international companies as desirable assets”, the note says.

ISBA director of public affairs Ian Twinn says although those involved need to be careful about synergies, mergers and acquisitions activity can make a marketer’s job “more exciting” as they tackle the challenge of new brands.

The news of recent mergers and acquisitions activity follows a depressed period that saw a 40-year low in such corporate activity as the recession and financial crisis dried up credit lines.

According to the Office for National Statistics, spending on acquisitions dropped to £700M in the second quarter, from £8.2bn in the first three months of the year, although recent data from Thomson Reuters suggests that activity was on the rise at the end of August, albeit from a low base.

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