It has taken time for the low interest rates to spark the stock market into life.
Finally, investors are looking at companies' trading results, rather than headlines of doom and gloom in the eurozone, Cyprus included.
The rally that began last summer may have much further to run. Yet, it is only in recent weeks that market interest has spread into a pick-up in bids and new issues.
This new pattern means investors will see more flotations this year, as banks and private equity funds bring companies to market to sell shares. The big US bids for Heinz and Dell are a trend that could be repeated in the UK. The year is set to present investors with new investment opportunities and decisions on whether to accept takeover offers. How should this be factored in to an investment strategy?
The last boom in refinancing was in 2009, when many companies paid off debt. Most have since made good progress and justified the money investors put up. But, some with bigger debt burdens or tough strategic challenges did not recover, and will tap shareholders again this year. Thomas Cook, for example, is seeking to resolve its remaining debt problems. Six months ago its survival was in doubt, but new management has persuaded investors that refinancing would not be throwing good money after bad.
A number of pub groups and other consumer businesses are making similar recoveries from the corporate graveyard.
The rewards of backing a restructuring can be dramatic. Many of these shares have been among the stock market's best performers this year.
Typically, competition has reduced, as some competitors have gone to the wall. And banks have little alternative to being patient, and helping restructuring. Now the survivors may defy the pressure that will be put on the consumer this year by the pound's devaluation.
The weak pound also makes British businesses attractive to overseas investors. Major US groups now find it much cheaper to bid for a UK-listed business, and the extremely low cost of finance could make even large deals possible.
The enormous scale of the recent US bids suggest few British companies would be too big to buy. Even Vodafone has featured in bid rumours.
FTSE 100 companies such as Weir Group and Aggreko, with growing international interests, could get attention. Although Britain does not have as many major independent industrial businesses as some other developed economies, groups like GKN, Rolls Royce and Invensys are highly regarded. The UK devaluation could trigger the disappearance of some historic companies and iconic brands.
The stock market recovery is also encouraging new issues. Flotations such as Direct Line and esure have been offered to private investors as well as institutions. High-dividend yields compared to the returns on other savings are the main attraction. However, investors should remember that shares have greater risks than most other savings; Direct Line and esure are in a tough market.
There is pressure on banks to sell assets, and this may mean initial valuations are reasonable. The same pattern has been seen with some of the other flotations from private equity funds, where disposals are needed to pave the way for new fund launches.
Shares should not be bought for takeover prospects, but the pound's fall will boost profits in industrial businesses with global interests. However, turnaround businesses needing more finance have greater risks, and should be smaller investments.
Investors should recognise they may be asked to put up more money this year. The key is credibility in management strategy, and whether problems are being solved. The pick-up in bids, deals and restructuring is an encouraging sign for business confidence, and should help the stock market.
SVM Asset Management has holdings in Weir Group, Aggreko, GKN, Rolls Royce and Invensys
l Colin McLean is managing director of SVM Asset Management.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article