Finding the companies most likely to be acquired

One of my big calls for 2026 is that takeovers will continue to be a big feature of the UK markets. Given the valuation disparity as you go down the size of listed companies, my theory is that smaller fish will increasingly be seen as dinner for larger predators from the UK and beyond. In a world where UK retail funds continue to see outflows, I also expect takeovers to be one of the primary sources of “accelerated price discovery” for investors this year. I laid out my full argument in the first article in this series.
Charlie Mungers, not Ben Grahams
Last week, Alex added a more rigorous analysis of the data on what type of companies had received takeovers over the last few years. To be honest, the results surprised me. Acquirers were far more likely to be “Mungers” than “Grahams”. On the whole, they haven’t been buying companies significantly cheaper than market averages on most valuation metrics:

I would argue that valuations do matter, and it is the availability of stocks on a Price to Free Cash Flow of 12 that makes the UK a rich hunting...