Appetite for UK companies – There are 19 ongoing bids for FTSE 350 companies, vs just two in the whole of last year. This reflects greater corporate appetite and confidence in the outlook for the UK.
• 3Q bid activity – There were 11 meaningful bids in the period, taking the total YTD date to 40, with a total value of £47bn.
• Attractive premiums – The average bid premium is currently running at 40% vs the undisturbed price. The UK continues to be a happy hunting ground for both corporate and PE bidders, due to low valuations and willing sellers, although there is greater propensity to rebuff bids seen as too low (eg Rightmove).
Key themes:
• De-equitisation. The total equity value of bids announced YTD and still live is £47bn. Including the bids announced last year and completing this year, and de-listings from the UK, the total value is £97bn.
• Going up the market cap. Of the 40 transactions announced YTD, there were 19 in the FTSE 350, five in the FTSE SmallCap and 14 on AIM. In the whole of FY23, there were 39 transactions announced, of which two were in the FTSE 350, 14 in the FTSE SmallCap and 19 on AIM.
• Corporate weighting. Last year, the majority (56%) of offers were from financial buyers, whereas corporate buyers (68%) have dominated in 2024, as the rate environment and economic outlook have become clearer, demonstrating the value of UK companies.
• Multiple offers. There were seven competitive situations YTD (Alpha Financial, Capital & Regional, DS Smith, Hipgnosis, Spirent, Tritax EuroBox and Wincanton) and eight raised offers (among those still live).
• High premiums. The average premium thus far in FY24 is 40%, with some materially higher than the undisturbed price (eg Wincanton +104%, Spirent +86%, International Distributions Services +73% and Keywords Studios +69%).
• Overseas appetite. Overseas bidders are 55% of the total YTD.
• Tech and Real Estate focus. Tech and Real Estate have been the most active sector. The current market value of TMT companies being acquired is £10bn, while for Real Estate it is £4.5bn.
• The ones that got away. Six notable offers were rebuffed (Anglo American, Currys, Direct Line, Elementis, Rightmove and XP Power), of which five are FTSE 350 companies.
UK M&A – an accelerating trend
We show below the bid activity YTD at over £100m equity value.
Figure 1: Bid activity YTD (over £100m equity value)
Source: Company accounts, Peel Hunt estimates
Key points to note are:
It has been particularly noticeable that corporates have been the main acquirors. This suggests greater confidence in the economic outlook and the interest rate environment. It also shows the attractiveness of UK companies and the potential for synergies in a low-growth environment.
It has been surprising to see relatively low activity from private equity, given the c.$4tn of dry powder currently available. We expect this to change as financing conditions improve, which means that PE is likely to be a more active acquiror going forwards.
Currently there are willing buyers (attracted by the valuations available and the probability of a successful conclusion) and willing sellers (due to fund outflows and the scale of premiums). In addition, the private markets are slower to adjust to tougher economic conditions, which means that acquisition multiples can be unrealistic in the private market.
Value. The total equity value of the bids amounts to £47bn. The split per index is shown below:
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Figure 2: Value and share of total value per index |
|
Value |
Value (£bn) |
% of market value |
|
FTSE 100 |
5.7 |
0% |
|
FTSE 250 |
34.7 |
10% |
|
FTSE SmallCap ex Inv Trusts |
0.7 |
2% |
|
AIM |
5.6 |
8% |
|
Source: Peel Hunt estimates |
This shows that companies representing 10% of the total value of the FTSE 250 are potentially leaving in just nine months (NB: we have included Hargreaves Lansdown in the FTSE 250, as it was promoted to the FTSE 100 post the bid).
Index. There are 18 bids progressing in the FTSE 250 currently, as shown below (again including Hargreaves Lansdown as a FTSE 250 constituent for this analysis).
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Figure 3: Number and share of of departures per index |
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Source: Peel Hunt estimates |
The impact on the FTSE SmallCap is much greater than suggested by the data above, as a number of constituents are set to be promoted to the FTSE 250 to replace the companies being acquired. In addition, there are two REITS that are in wind-down.
Sector. The Tech and Real Estate sectors have been the most active, with seven transactions each, as shown below.
Figure 4: Split by sector 
Source: Peel Hunt estimates
Activity by quarter. The pace and size has been consistently higher than the comparative period last year. It was not surprising to see the reduction in activity in 3Q given the normal summer lull.
Figure 5: Bid activity by quarter
Source: Peel Hunt estimates
Given the improving economic environment and a more accommodating lending market, it feels highly likely that the elevated rate of M&A will continue in 2H.
Although there are tentative signs of the IPO market starting to emerge from hibernation, it seems obvious that there are structural issues in the UK that need to be addressed to retain a healthy UK equity market, particularly for smaller companies. We believe we need to address the demand side, if the UK is to retain its growth companies and to ensure that the equity market is able to provide long-term growth capital. In our view this can be delivered through pension reform, ISA reform and a national wealth fund.
