What do you get when you combine cheap money with under-geared balance sheets?
Answer: Mergers and acquisitions.
Within the first hour of trading this morning, the stakes again were raised in bidding wars for two financial vehicles, The Trust Co (TRU) and RHG Group (RHG), the rump of the old Rams home loan operation.
While minnows in the broad scheme of things, the prospect of a resurgence in corporate earnings combined with record low interest rates and a corporate sector that has spare balance sheet capacity is likely to see a broad uptick in contested takeovers after more than four years in the doldrums.
The Trust Co, now the subject of a three way tussle for control, this morning accepted a revised offer from Perpetual (PPT) after it last week was trumped by Melbourne based financial group IOOF. Perpetual earlier outbid Equity Trustee which now appears to have surrendered.
IOOF (IFL) last week imposed a three day deadline to accept its offer in effort to force Perpetual out of the race, given a ruling on competition concerns with Perpetual has yet to be handed down.
RHG, meanwhile, was on the receiving end of yet another sweetened bid from mortgage player Pepper which has teamed up with funds manager Cadence, RHG's largest shareholder. The pair have been in a bidding duel with the Resimac syndicate, led by Trevor Loewensohn's Alceon Group, for months.
Like the Trust Co, the RHG board has been in the happy position of greeting each new offer with an acceptance.
The upswing in takeover activity at the smaller end of the financial services market follows last week's $100 million capital raising by infrastructure group Duet (DUE) and points to renewed activity in industrials and financials.
It also follows last week's telco mega deals with Microsoft and Nokia, and Verizon and Vodafone.
The resources sector, meanwhile, has struggled to raise capital, particularly at the smaller end of the market as major resource houses continue to offload unwanted assets.