Talk of mergers peps up small and mid-cap sector

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Corporate activity is picking up among UK small and mid-cap companies, suggesting the sector is unde...

Corporate activity is picking up among UK small and mid-cap companies, suggesting the sector is undervalued, in the eyes of Richard Smith, manager of the Invesco Perpetual UK Smaller Companies Equity fund. The pick-up in merger activity, according to Smith, is because small companies are currently trading at a 20%-30% discount to large firms on a P/E basis. Smith says these stocks, as measured by the FTSE Small Cap Index, currently have an average free cashflow yield of 12.5%, which represents not only a high absolute yield but one that makes many firms attractive for buyout activity. ...

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