My take on Taylor Woodrow's £480m takeover of Wilson Connolly, as well as the feverish speculation linking just about every major housebuilder with the acquisition of a smaller rival, is that the big boys are gearing themselves up to break into the FTSE 100.
There is no housebuilder yet in the FTSE 100, but the larger players are seeking to grow to major corporate size. This opens them up to a whole new set of investors and will get them rerated. Hopefully, a knock-on effect will be that smaller listed housebuilders, such as Swan Hill, will also being rerated.

For five to 10 years, the sector has provided consistent, growing profits. Yet housebuilders tend to have a share price of only around six times its earnings – other, more unpredictable industries, can expect this figure to be closer to 11 or 12. That's where we should be.

The sector is clearly undervalued – probably a hang-up from the early 1990s. At that time there was a series of write-downs and poor results from housebuilders.

The City still has this in the back of its mind, but with the emergence of between five and seven mega-housebuilders knocking on the door of the FTSE 100, the perception should change.

This will lead to the creation of two types of housebuilder: the big player and the regional specialist. At risk are medium-sized firms that sell 2000-5000 units a year. Wilcon completed 4000 sales in 2002/03 – the perfect size to turn Taywood into a major player.

There's been much speculation, for a good number of years, over the future of smaller housebuilders. At Swan Hill we want to be one of the best regional specialists, with our next objective to hit a turnover of £100-120m. As a listed company, we can never say never to any takeover bid. However, we produce fewer than 300 units a year. I suspect that a major housebuilder is unlikely to come after us – for if they want to get into that top 100, they need to buy the Wilcons of this world.

Postscript

John Theakston is chief executive of Swan Hill.