How to have a say (and cash in) on London stock market bid frenzy
London’s stock market is in the grip of a takeover ‘feeding frenzy’ with new bids coming thick and fast.
As City experts predict that the buyout bonanza will continue, it is important to know what to do if a business you own shares in becomes a takeover target.
What happens if a company I hold shares in receives a takeover offer?
The share price of a target company usually spikes on news of a takeover bid.
If the stock reaches the offer price, it is a good sign that investors are keen on the deal. But if the target firm’s shares exceed that amount it indicates that the market expects a higher offer and even a bidding war. And if the price languishes below the offer value, shareholders are likely unimpressed by the bid or believe it will fail.
What should I do next?
Shareholders have several options following a takeover bid. You could sell your shares at a premium following an offer.
Buyout bonanza: London’s stock market is in the grip of a takeover ‘feeding frenzy’ with new bids coming thick and fast
For example, shares in Royal Mail owner International Distribution Services were worth 214p each before a bid by the Czech Sphinx, Daniel Kretinsky. After the board agreed a deal with the billionaire last week, the price rose to 335p.
An IDS investor with 1,000 shares would get £3,350 at that price – some £1,210 more than they were worth before the bid.
If you do nothing and the deal goes ahead, your shares will be replaced by cash or stock in the new company depending on the terms of the offer. But bear in mind that if a deal collapses, the value of the company’s stock could plummet.
How can I have my say?
All takeover deals must be voted on by shareholders so investors can have their say. You will typically get one vote per common share held.
Many retail investors buy stocks through an investment platform such as AJ Bell, Hargreaves Lansdown and Interactive Investor.
You will have to contact the platform that you used to buy your shares to find out how to vote. Investors who indirectly hold shares through funds or pensions do not get a vote.
