Good morning! It's Paul here with the SCVR for Wednesday.

I had a lie in today, so the first section won't be up until about 11am.

There isn't any company news of interest today, so I've just had a think about M&A instead.

Today's report is now finished.


Mergers & Acquisitions

I was a bit bored over Xmas, so started clicking on cars for sale, always enjoyable but dangerous. Anyway, I've agreed to buy a classic Daimler Double-Six (1990) - in my view the most beautiful saloon car ever made. It will be lovely to just enjoy owning it, to me it's art. I justify the V12 engine on the basis that I'll probably drive it less than 500 miles p.a. therefore the environmental damage is minimal, and offset by my using entirely renewable electricity in my flat.

Here she is - a Japanese import, so in mint condition, only 35k miles from new. The service history is all there, but in Japanese script, so I had to take it largely on trust!

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Anyway, the chap selling it works in the city, for a large overseas bank, doing leveraged buyouts with private equity firms. We were chatting about it, and he told me something interesting. Namely that banks & private equity generally think that they were too cautious in 2008-9, and missed a lot of stunning opportunities to pick up great assets on the cheap. They're determined not to make the same mistake this time, and the deal pipeline is incredibly busy he said.

Particularly with the main Brexit uncertainty now removed (although plenty of loose ends still to be tied up), he reckons there is likely to be a large wave of takeover bids in 2021. A fund manager said something similar in a recent newspaper article, but I can't remember which one.

People sometimes ask me how to identify takeover targets. A good place to start is obviously undervalued shares like Redde Northgate (LON:REDD) (I hold). Even though it's gone up a lot in the last 2 months, it's still irrationally cheap in my view - fwd PER of 8.5 (we can rely on forecasts because it's recently confirmed trading in line), and a divi yield of 6.0%. Combined with a strong balance sheet - what's not to like about that? It's historically been a very cash generative…

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