It has been a difficult 2020 for stockmarkets, as the world fights to contain the coronavirus outbreak.
While there remains significant scepticism, at some point, investors will return to equity markets.
When this occurs, the UK could be set for particular attention, as UK stocks still trade at a relative discount to other developed markets.
Within UK equity markets, the small-cap space has particularly suffered, recently impacted by liquidity concerns emanating from the Woodford scandal.
Micro caps are even more unloved, trading at an almost 20% discount to the wider small-cap universe.
With double and triple discounts, small and micro caps will undoubtedly pique the interest of corporate buyers and private equity investors.
Companies with sound fundamentals are available for purchase at attractive prices - and, for foreign investors, at a favourable exchange rate.
While we do not specifically invest in companies in the hope of a takeover, the characteristics we look for in a business - such as high-quality management, a competitive advantage, strong earnings visibility and dividend growth potential - also attract acquirers.
These are often companies looking for bolt-on acquisitions, or private equity investors seeking standalone assets.
Moreover, we concentrate on the small- and micro-cap space, where a lack of broker research enables the discovery of overlooked businesses.
Takeovers can occur at opportune times for stocks we hold, when we feel upside potential has run its course and the company has realised its potential value.
In these cases, a takeover can offer a share price uplift that would have been otherwise unattainable.
However, acquisitions can also cause frustration if they arise before the upside potential has been maximised.
While there is no way of predicting the companies likely to be subject to a takeover bid and when, we try to understand trends and acquisition strategies of big corporates in the market.
The key to ensuring the best possible outcome for a takeover is to be engaged throughout the process.
With smaller companies, where we own a larger stake in the business, we can have the most impact in determining the final outcome.
Ken Wotton is lead manager of LF Gresham House UK Multi Cap Income fund
• UK stocks trade at relative discount to other developed markets
• Additional bargains on offer in UK small and micro caps
• Fearful investors will result in heightened global volatility
• Liquidity pessimism post-Woodford still impacting small caps