Shareholder backlash pushes up low-ball London takeover bids
Top shareholders of London-listed firms are pushing back on takeover bids this year amid concerns buyers are capitalising on low valuations to pick up companies on the cheap.
Foreign buyers have targeted companies across the London Stock Exchange this year including FTSE 100 firms Schroders, Intertek and Beazley. Retail investment firm AJ Bell said it expects the total value of live or completed bids to hit £69.3bn by the end of 2026.
Analysts have pinned the takeover wave on the UK’s persistent low valuations compared to global competitors. But the rise in bids has left some shareholders concerned that firms are exploiting the gap and submitting low-ball offers.
Henrik Persson, head of public M&A at Cavendish, said: “Investors have become much more willing to be vocal in takeover situations. Partly that is about influencing the outcome, but it is also about demonstrating…that they are active owners rather than passive observers.
“Recent situations…have emboldened shareholders that saying ‘no’ works. Once investors have seen bidders repeatedly come back with more, it becomes harder to persuade them that the opening bid is the best bid.”
Pushing up…
The UK’s persistent depressed valuations have allowed deep-pocketed private buyers to present themselves as the only option to businesses who are floundering on the stock market.
Since 2023, there have been 154 bids for UK companies with a market value of more than £100m, erasing around £165bn of market capitalisation. The average price paid by acquirers relative to companies’ share prices has hit 45 per cent this year, according to data from AJ Bell.
While some companies take the first offer, many shareholders have pushed back and urged boards to reevaluate and negotiate for more lucrative deals.
FTSE 100 investor Segro rejected three takeover bids from US rival Prologis this year, arguing they were “opportunistic” before accepting a £14bn offer.
Shareholders were credited with influencing Segro’s decision. Major institutional investors, including APG Asset Management and Norges Bank, actively urged management to engage in talks and accept the sweetened final proposal.
Testing company Intertek also declined three takeover bids from Swedish private equity firm EQT, arguing they undervalued the group before accepting a £10.6bn offer.
Activist investor Palliser Capital urged the company to engage with EQT, saying the deal represented “an attractive opportunity for shareholders”.
Russ Mould, investment director at AJ Bell, said: “Any takeover bid…brings together the desire of the buyer to pay as little as possible, to protect their downside and maximise their upside.
“Most shareholder push-back on any deal will therefore relate to the price, and implied valuation, on offer.”
… and pushing back
Despite investors becoming more bullish in pushing for higher offers, not all firms listen to concerns.
One of the London Stock Exchange’s largest energy businesses agreed to a controversial £5.7bn takeover at the end of July.
DCC Energy agreed to be purchased by UK private equity groups KKR and Energy Capital Partners after DCC’s board recommended the offer despite uproar from its founder and largest institutional shareholders.
Founder Jim Flavin said he was “astounded” by the offer. Pension companies Aviva and Fidelity said it did not benefit their clients and was a “bad outcome” for shareholders.
Other shareholders, including Man Group and Allianz, declined to comment on the bid and upcoming shareholder vote in September.
Persson said there was growing “public discourse” surrounding takeover bids and the market had grown more comfortable with shareholders taking their concerns public.
“I do not think any of this will reduce takeover activity. Deals will still get done because the opportunities are still there,” he added.
“Public scrutiny, shareholder activism and bidding contests are increasingly part of the process rather than a reason for transactions not to happen.”