When it became very obvious that there was going to be a substantial economic downturn I started to read articles on how low the markets would fall. I have read all kinds of ideas on the subject, those related to charting and historians comparing to previous drops to name but two. One simple suggestion appealed to me … the markets will have neared a bottom when takeovers and mergers start to happen again.

Is a simple idea, I guess its suggesting that companies across the board will be affected by the downturn, a small few will actually prosper but most will be hit, but those that have been run well prior to the downturn will be hit a lot less to those that have not. Many of those companies struggling did not anticipate the downturn as well as others, in fact some of those with the biggest share price drops have large debts due to acquisitions made just before the downturn started. It cannot just be luck that some of these did not see it coming and some did.

It stands to reason then that those that have escaped the worst and have strong balance sheets are now in a position to look at the others as takeover targets, and that if their chiefs have safely guided them through the downturn decide its time to look at acquisitions then these guys are probably worth listening to.

Anyway today I am looking at a heading in the Financial Times ‘Merck buys Schering-Plough for $41bn.

Maybe the bottom is close ?