Following the recent turmoil in financial markets, Bernheim Dreyfus, managers of the Diva Synergy Fund, is seeing major opportunities for profit in the mergers and acquisition space.
Over the last year, the Diva Synergy Fund has achieved 11 positive months out of 12 thanks to growing M&A activity and the manager’s ability to extract alpha from hard catalyst situations.
The fund is also ranked best performer on a year-to-date and last 12 months basis worldwide in its category by Barrons, Morningstar, Barclay Hedge and Eureka Hedge.
Conditions are developing for a sustained level of deal activity over the next 18 to 24 months and Bernheim Dreyfus believes this will present a good investing environment for funds.
High levels of corporate cash, combined with historically low interest rates and continued reasonable valuations in the equity markets have allowed bidders to pay significant premiums to the market for target companies. These same factors have also provided the impetus for the increasing number of competitive bidding situations which have been responsible for some of this year’s gains.
M&A activity in the third quarter of 2010 was the busiest in two years, with USD563bn of announced transactions.
“With almost USD3trn of cash in their coffers, companies drove a 59 per cent increase in takeovers from a year ago. Record-low borrowing costs encouraged deal making and the number of transactions valued at more than USD3bn doubled in the quarter. The jump in deals in the third quarter, typically the slowest three-month period of the year, brings total announced takeovers to USD1.48trn in the first nine months of 2010, compared with USD1.76trn in all of 2009. This quarter accounted for about 38 per cent of the volume so far this year,” says the Bernheim Dreyfus report.
The managers of the Diva Synergy Funds (both euro and dollar classes) have moved quickly to exploit the opportunities arising from this expanding sector where third quarter M&A activity increased 21 per cent over the second quarter of 2010 to USD677bn, the largest quarter for worldwide M&A since the third quarter of 2008.