Investors Start to Spot Potential Takeovers

Thomson Financial expects another big year of mergers and acquisitions, and the prospect of mergers has captured investors' attention, as they are now trying to spot potential mergers in an effort to boost their returns, according to the International Herald Tribune.

Many companies have had sufficient funds to make acquisitions, since profits reached a record high last year, according the Alec Young, an equity market strategist at Standard & Poor's. He also added that the economy was leveling and that business were looking to mergers and acquisitions in an effort to avoid having the same fate.

The increase in merger activity "is more of a market share game as growth slows and the expansion grows longer in tooth," Young said. "You buy a company that compliments your core business, lay off all the people that perform redundant functions and it's a big improvement to the bottom line."

Sectors that are popular for takeovers are the drug, healthcare, technology, telecommunications and real estate, said Roy Behren, an analyst with Morningstar. He added that those companies that have cash on heir books are more likely to be added to the list of takeover candidates.