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The British stock market has become a “happy hunting ground” for predators as a record number of leading listed companies are subject to takeover bids.
New analysis by broker Peel Hunt found that 19 attempts to take over FTSE 350 companies announced this year were still active or completed.
However, there are also signs that British boards are less likely to ‘handover’ to a buyer, as an increasing number (such as Rightmove this week) reject offers they consider to be undervalued.
Charles Hall, head of research at Peel Hunt, said the growth in takeover attempts reflected “increased corporate appetite and confidence in the outlook for the UK”.
The biggest deals include a private equity consortium’s £5.4bn takeover of Hargreaves Lansdown and Czech billionaire Daniel Kretinsky’s bid to buy Royal Mail owner International Distribution Services for £3.6bn.
Acquisition frenzy: New analysis by broker Peel Hunt found 19 attempts to take over FTSE 350 companies announced this year were still active or completed
However, notable ‘getaways’ include Currys, which rejected a £750m approach from US hedge fund Elliott, and Rightmove, which this week saw a fourth bid worth £6.2bn from Rea Group, endorsed by Rupert Murdoch.
But the scale of the acquisition frenzy means companies representing 10 per cent of the value of the FTSE 250 index could exit the index as a result of bids in the space of just nine months.
Hall said: “The UK remains a happy hunting ground for private equity and corporate bidders, due to low valuations and willing sellers, although there is a greater propensity to reject offers deemed too low.”
He added that the improving economic environment and the easing of credit conditions made it “very likely that the high level of mergers and acquisitions will continue.”
It is the latest evidence that the dismal performance of the British stock market has left many companies vulnerable to predators, including both sector rivals and private equity predators.
Peel Hunt’s research showed 40 transactions so far this year, including stocks listed on the junior Aim and small cap markets. Its value rose to £47 billion.
The report said buyers were attracted to available valuations and sellers were attracted to offers with an average premium of 40 per cent to the share price.
Foreign bidders account for 55 percent of the total, according to the report. Hall said key reforms were now needed “to maintain a healthy British stock market”.
This includes addressing the pool of money available to invest “if the UK is to retain its growing businesses and ensuring the stock market is able to provide long-term growth capital”.
Hall argues this could be achieved by reorganizing pensions and individual savings accounts (ISAs), as well as a national wealth fund.
And he highlighted positive signs from companies such as Rightmove and Currys – as well as Direct Line and Anglo American – which have rejected offers.
“We are encouraged that boards are becoming stronger and recognizing the strategic value of the business, as well as improving economic prospects, rather than simply turning around and accepting a subpar offer,” Hall said.
Richard Bernstein, a director at activist investor Crystal Amber, said: “It’s good news for shareholders that boards that are aligned with shareholders are being stronger.”
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