With global markets in turmoil, look closer to home for British bargains to bag in a perfect storm

After the mayhem, the search for bargains begins. There was an abrupt sell-off in global stock markets this week, sparked by fears of a US recession and the unwinding of bets on the Japanese currency, the yen.

But, while volatility may continue, the audacious seem keen to scout out opportunities in the US, Japan – and the UK.

The FTSE 100 was caught up in the rout, but recovered mid-week. This evidence of its resilience may heighten the focus on UK shares. The perception that British shares are unloved and looking cheap has been fuelling a takeover spree in recent months, with merger and acquisition activity 84 per cent higher than a year ago.

If you are looking at your portfolio in the wake of the turbulence, taking a chance on some British names could be a useful diversification.

You could turn a profit if a bid for a company materialises. But if this does not prove to be the case, you will have a stake in a business that should be boosted by the improving economy.

In the last fortnight, for example, Royal rat catcher Rentokil has emerged as a potential target, fuelled by rumours that former BT boss Philip Jansen may lead a private equity raid.

Yesterday, broker Hargreaves Lansdown agreed to sell itself to private equity suitors for £5.4billion.

But among the British companies that have already succumbed to aggressors are Dechra Pharmaceuticals and Keyword Studios. Both were acquired by EQT, the Swedish private equity player.

EQT made five successive offers for video game services provider Keyword, finally agreeing a price of £2.2billion. This was close to 70 per cent higher than its first offer.

The £3.7biilion offer for the Royal Mail’s owner International Distributions Services from EP Global Commerce, the vehicle of Czech entrepreneur Daniel Kretinsky, has this week become subject to an investigation under the National Security and Investment Act.

While the outcome of this probe is awaited, the race is on to find the next potential targets, with the kind of credentials, including debt levels, profit margins and price earnings multiples, that are likely to entice bidders.

Canaccord Genuity’s Quest analytics tool Quest has produced 16 such companies that could give your DIY portfolio a summer makeover. Here are some of the likely candidates:

MONEYSUPERMARKET

The companies that predators could be sizing up include media, mining, oil and pharmaceutical businesses. But Canaccord Genuity reckons that there could be particularly rich pickings in the financial services sector, with nine companies seen as susceptible to an approach.

The best known among them is the price comparison platform Moneysupermarket, owner of Moneysavingexpert, the website of financial guru Martin Lewis.

Moneysupermarket’s shares are down 21 per cent this year to 215p, having tumbled this week. However, analysts’ estimate that they could rise to 283p. Maybe a predator would like to pounce before the price reaches that level?

WISE

The largest financial services business on the Canaccord Genuity list is the international payments fintech £7.38billion Wise. The formerly stellar company says that it is being forced to spend more to attract customers, a setback that has caused the shares to decline this year by 19 per cent to 686p.

Despite these challenges, Wise believes it has the ‘technology, scale and infrastructure’ necessary to excel and analysts agree. The analysts at Berenberg estimate that the price could leap to 1140p, making Wise shares possibly worth a gamble. The average target price is 932p.

Money man: Martin Lewis

LIONTRUST

Liontrust Asset Management was itself on the takeover trail last year, pursuing the GAM business. This deal failed and now Liontrust may be vulnerable.

Its shares are flat over the last 12 months. Even if a bidder does not emerge, analysts rate the shares either as ‘buy’ or a ‘hold’ and expect the price to climb back to 811p.

INDIVIOR

Pharma group Indivior has been forced to suspend sales of Perseris, its schizophrenia drug. Meanwhile, demand in the United States for its opioid addiction treatment Sublocade has weakened. As a result, the shares have tumbled by 48 per cent over the past 12 months to 983p.

But the US investor Oaktree Capital Management seems undeterred, having just raised its stake in the troubled company. This suggests Indivior may be either be taken over or take a turn for the better.

For investors, either would be a desirable outcome.

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