Foreign investors and private equity funds are snapping up UK blue chip firms as low interest rates, cheap equity market valuations and risk aversion at pension funds fuels the hunt for stakes in FTSE companies.
There has been no shortage of predators hovering over the FTSE 100 index, which has battled to regain four-and-a-half-year highs over the last couple of years.
Mobile phone company O2 has gone to Spanish investors who are also targeting airports group BAA, while logistics group Exel has been snapped up by German investors and bid talk persists around a bunch of shares, including bank group Lloyds TSB and directories group Yell.
Appetite for targets spreads over all sectors in the FTSE 100 with industrial gases firm BOC fighting off a bid from German rival Linde, while ports group P&O has been won by Gulf state-backed Dubai Ports World.
Andrew Bell, European Strategist at fund managers Rensburg Sheppards, said a combination of factors - not least UK base rates at 4.5 per cent and UK pension deficit rules curbing their risk appetite - have created ideal conditions for acquisitions.
"At the moment we seem to be at a sweet spot or 'perfect storm' where the economic conditions are still reasonably benign, interest rates appear to be relatively stable, company balance sheets are in good shape so the conditions in which you can take a risk in borrowing money to buy a company are quite favourable," he said.
But with regulation effectively compelling pension funds to buy bonds and thereby keeping the market rates of interest investors pay to finance typically debt-funded takeover deals low, the trend is likely to remain in place for some time.
"It's definitely the case that pension funds have been reducing their allocation to equities and that's been driven mostly by legislative pressures to reduce their deficits and to match more closely their assets with projected liabilities," said Chris Iggo, a strategist at Axa Investment Managers.
Pension fund reticence to take risk is playing its part as UK institutions back off from the risks involved in equity investment because of Britain's tougher stance on pension fund deficits.
Britain's new Pension Regulator was set up by the government last year to police the pensions industry. It has proposed that if a company cannot plug a shortfall within 10 years it might step in to act.
Bell says that with pension funds chasing ever-tightening real bond yields on ever-lengthening maturities, foreign investors and private equity investors are taking advantage of low interest rates to fund FTSE purchases.
"It (M&A activity) is a byproduct of pension funds either selling or not being active buyers of equities that means they're comparatively cheaply rated. If our pension funds won't buy them then somebody else will and that's private equity and foreign companies," said Mr Bell.
"We've got a relatively open system where competition decisions are made on economic grounds more than they are on political grounds," he said, referring to Britain's relatively relaxed policing of overseas bids.
Axa's Iggo says the UK share market continues to rise even as pension funds get cold feet as companies - not just British firms - have plenty of cash from rising earnings.