He sees Enterprise and Lasmo as prime candidates. One analyst who declined to be named believed Total's takeover plans did not end with Petrofina and predicted a merger with its French rival Elf Aquitaine. They should move up again and Zeneca provides the best scope for share price gain, according to Mr Urquhart Stewart. Smaller drug and biotech stocks will see merger activity but there are too many and they are too hard to pick, he added. There are two ways investors exploit merger and takeover activity.
Smaller companies taken over by a larger competitor are where speculators find the best gains.
In buying a majority share in their targets, such companies often pay well above the market share price. But after picking the right stock, timing when to buy and then sell is another challenge altogether. Get in early, the more speculation intensifies, the more investors will buy in and drive up the price. Buy on rumour, sell on fact. Once a takeover deal firms up, the unknowns become knowns and the scope for any speculative gain reduces.