Takeover time

From porn to electronic appliances, takeover tussles are breaking out throughout the Australian market as companies attempt to take out their rivals at are what are still pretty cheap prices.

We’ve seen a rush of activity in the last few days. First there was Sexy Land’s pitch for Perth-based retailer Adultshop.com. Late on Friday, GUD Holdings lobbed a bid for electronic appliances company Breville. Today we’ve got rumours of a bid for Amcor, Seven Network creeping up the share registry of Consolidated Media and James Packer buying shares in Crown, sparking rumours he may look to take the whole thing private. There is also a host of deals in the mining and agribusiness sectors either underway or rumoured.

So what’s sparking the sudden rush of takeovers? After all, it’s only a few months since corporate Australia was apparently struggling in the midst of one of the biggest financial disasters in recent history.

The fact is the economy is recovering much faster than the experts – commentators, economists, even the Reserve Bank Governor – had anticipated.

Share prices have already risen sharply off the lows of March this year and company executives intent on expansion via acquisition are rightly figuring that it’s time to move before asset prices really take off.

Of course, wanting to do a deal and actually being able to are two very different things. Companies wanting to go on a buying spree will need to ensure they have strong balance sheets, as the debt funding that has supported acquisitions over the last five years will be much harder to come up with.

That’s partly why we’ve seen a wave of capital raisings in the last few months – companies are cashed up and ready to go shopping.

So expect to see a strong flow of deals in the coming weeks, as cashed-up companies try to stay just ahead of the economic cycle.

And if you’ve been hesitating about putting your recovery plan in place, then you’d better get moving.