A recent article from Tony Boyd in the Australian Financial Review shone a light on just how active the domestic Australian market has been for M & A activity in 2018. Our last Livewire submission seven months ago touched on a few key things to look out for when trading takeovers and was cautiously optimistic about the outlook of M & A moving forward. Since then, there has been immense opportunity to capitalise on a huge number of deals, and for those that have watched the space from the sidelines for the last six months, the good news is that its showing no signs of slowing down.
The beauty in trading M & A transactions is the low correlation the returns have with the broader indexes. The individual positions are largely insulated from any external swings, as the pricing of the target company is usually a reflection on the likelihood of the deal closing more than anything else. While not entirely devoid of risk (inevitably, not all deals complete as expected), the annualised returns on offer that make the risk/reward compelling, and even more so in a portfolio sense.