We believe that 2013 will see a continuation of the trend in 2012 for sector consolidation, which is a fancy way of saying that Small Caps are getting taken over.
In the past 12 months, there has been almost exactly the same number of deals as in the prior 12. The difference has been that the value of the deals has been halved.
Small Caps are easier for big companies to gobble up (because they cost less money) and there are less shareholders in the target to convince. It is also a handy way to achieve earnings growth, which in the current flat economic conditions is very enticing.
In our next issue we look at some of the stocks we think will be takeover targets. A hint is that you don't need to look much further than the miners.