Small caps want some of the "takeover by creep" action too, as signalled by yesterday's announcement yesterday of car dealership AP Eagers (APE) snapping up 16.3 per cent of fellow dealer Automotive Holdings (AHE).
Together these two have about a 12 per cent market share in Australia.
Alternatively described as “takeover by stealth” the idea is to take a controlling shareholding in a company with a wide share register (Rinehart owns 15 per cent of Fairfax Media, while the Packer-backed Crown is seeking to creep up to as much as 25 per cent ownership of rival casino group Echo Entertainment).
For the patient investor it means that there is the possibility of gaining control without paying a control premium. It also puts their collective feet on the asset, preventing someone else from acquiring it. It's a negative takeover - at least for shareholders banking on getting a takeover premium.
Takeovers are on the up
Make no mistake, trading volumes on the ASX might be wilting and banks are as cautious as they've ever been, but merger and acquisition activity is taking place.
And it's happening more at the smaller end, simply because there are more companies (and they cost less).
Of course, there was the bizarre bid from last month for David Jones by a UK hedge fund. But that aside, building products supplier Alesco is under takeover by the paint manufacturer Dulux, which has secured almost 30 per cent in a $188 million offer which expires on Friday.
And cleaning group Spotless finally succumbed in late April to the barbarians at Pacific Equity Partners for a cool $720 million.
So where to from here on the M&A front?
Mining services is one sector that will be worth watching.
It is a fragmented industry where many of the players are under increasing pressure to find new contracts (but have big overheads in the form of employee and equipment costs).
Construction group Leighton Holdings is selling assets to ensure that it has a future after some high-profile cost blow-outs both here and in the Middle East. Companies that might stand to benefit include coal-handling equipment supplier Sedgman (SDM) and the drilling group Macmahon Holdings (MAH).
Stay tuned for more action on the takeover front.
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