As we emerge from the recession, expect to see a sharp increase in mergers and acquisitions activity. A great example announced yesterday - the acquisition by Asda or 193 Netto stores which enables Asda to claim that it is now the number two grocery retailer in the UK behind Tesco.

The deal has cost Asda £778 million and is a sign that Asda will use external growth as a key part of its strategy. Asda is also rumoured to be targeting Home Retail Group, the owner of Argos and Homebase.

Why Netto? Netto is a discount retailer - competing against the mainstream grocery retailers by offering a more limited range of products at significant pricing discounts. Netto competes alongside Aldi and Lidl in the UK discount grocery segment. These businesses have enjoyed a relatively successful few years as the recession persuaded some households to “trade down” in search of better value for money.

Asda is expected to rebrand the Netto stores under the Asda branding within the next year, and to expand significantly the store product range.