‘The jack is out of the box’: London-listed firms picked off as UK dealmaking springs to life
A raid on London-listed firms has accelerated in the opening months of the year as cashed up corporate buyers take advantage of sluggish valuations on the City’s public markets, new figures have revealed.
A total of 30 listed companies have come under offer in the opening six months of the year at an average price of just over £1bn, signalling a more aggressive slant from buyers looking to now snap up companies at the larger end of the market, according to analysis from investment bank Peel Hunt.
Analysts at the City firm said the UK’s takeover market had been like a “coiled spring” at the beginning of the year that had now sprung into life.
“The jack is out of the box,” said Michael Nicholson, head of mergers and acquisitions at Peel Hunt.
Of the 30 companies to come under offer, 11 were in the FTSE 250, a sharp increase on the same period last year when just two of London’s biggest 250 companies were subject to takeover bids.
The figures point towards a stabilising of the dealmaking market after two years in which the appetite for bumper transactions has been curtailed by volatile markets and rising interest rates, which have ramped up the cost of financing deals.
The prospect of a “stable UK government supported by a large majority” and steadier economic conditions had driven a rally in deals appetite across the market, Nicholson said.
So-called strategic buyers, corporate companies buying up rivals, made up 80 per cent of offers over £500m in the first half of this year. Interest from private equity has so far been tempered by the lofty price expectations of sellers and the fact interest rates are yet to be reined in.
The average premium paid by buyers came in between 40-60 per cent in the opening months of the year, fuelling the feeling that London’s listed companies are undervalued.
International Paper’s £5.8bn acquisition of DS Smith, as well as domestic consolidation including Barratt’s £2.5bn recommended combination with Redrow and LondonMetric Property’s £1.9bn merger with LXI REIT, have been among the biggest deals of 2024 so far.
The acceleration of takeovers has unsettled the City due to a still subdued IPO market and a lack of firms replacing those being acquired. The London Stock Exchange has hosted just four IPOs on its main market this year, according to data from the bourse. Just 23 firms floated last year, down 40 per cent on an already quiet 2022.
However, the City has been buoyed by the successful float of computer maker Raspberry Pi in the past month, as well as the looming IPO of fast-fashion giant Shein.