Stock Market

Rush of overseas bidders sparks deal-making boom in this country

Overseas bidders are swooping on U.K. targets at breakneck speed as chief executives look to expand into new markets and boost growth to position themselves for the post-pandemic world.

The value of U.K. deals has soared to $29 billion so far this year, already three times the total $8.7 billion for the same period in 2020 and the highest number since 2000, according to data from Refinitiv.

“The currency stability provided by Brexit, combined with the material undervaluation of the London market and COVID affected primarily domestic U.K. businesses, such as services and retail, has unleashed a tsunami of private equity with euro and dollar denominated funds or overseas strategic buyers to pursue multiple U.K. targets across multiple sectors,” said Philip Noblet, head of U.K. investment banking at Jefferies

“Private equity in particular, with a mountain of capital and high leverage available at low cost, sees U.K. public companies as being an excellent source of targets that can be used as platforms for growth,” he added.

Read: Why M&A is set to continue its hot streak in 2021


-supplier Dialog Semiconductor

became the latest company to attract interest from foreign buyers after it agreed to a $6 billion all-cash bid from Japan’s Renesas Electronics

on Monday. The deal comes amid a surge in deal making among global chip makers, whose products are in demand as more people stay at home amid the COVID-19 pandemic.

Meanwhile, Aggreko

said on Friday that it is in talks with a private equity consortium, which includes TDR Capital and U.S. infrastructure investor Squared Capital, about a possible all-cash takeover offer of 880p per share, valuing the power-equipment maker at around £2.2 billion. The company said discussions are ongoing.

Related News  Fed will be encouraged by the May job-market surprise but unlikely to rip up its low-rates-for-longer script

Bankers said there were several reasons behind the resurgence in activity, including pent-up demand from bidders that had paused their deal-making ambitions at the height of the pandemic, as they moved to protect their balance sheets.

Read: Meet the top 50 deal makers in European M&A

The rollout of COVID-19 vaccine programs in several countries — including the U.S., U.K. and in Europe — has also encouraged chief executives to take advantage of low valuations of London-listed companies, many of which are trading at a discount to their global peers, to step up their expansion efforts into international markets.

“We have seen a surprisingly resilient U.K. M&A [mergers and acquisitions] market in recent years, with a particularly strong second half of 2020. We are seeing a good level of activity at the moment and the outlook therefore continues to look robust,” said Ian Hart, co-chairman of U.K. investment banking at UBS

U.K. equity markets have also enjoyed the resurgence in confidence, with several companies making their stock market debuts on the London Stock Exchange

in recent weeks.

Read: Boom in online sales during pandemic propels personalized-card company Moonpig to $1.4 billion listing

Shares in iconic British boot-maker Dr. Martens

and online greetings-card retailer Moonpig

soared 22% and 29% respectively on their first day of trading, highlighting investor appetite for businesses that have thrived during the pandemic.

Related News  Risk of identity theft is high this year, here’s how experts say you can protect your credit

But the surge in interest in U.K. companies means some targets are playing harder to get. In January, U.S. casino group MGM

abandoned its attempt to buy Entain
the sports-betting and gaming group that owns bookmakers Ladbrokes and Coral, after its all-stock £13.83 pence-a-share offer was robustly rejected by the target’s board, which said the proposal “significantly undervalues” the business. 

Other companies have been subject to fierce bidding wars as target companies bargain with prospective bidders to try to achieve the highest sale price possible for their own shareholders.

Last week, Signature Aviation

agreed to a $4.7 billion takeover from a consortium comprising Blackstone
Global Infrastructure Partners, and Cascade, the investment vehicle owned by Microsoft

founder Bill Gates, after rival bidders teamed up to mount a joint bid.

Coronavirus-resilient sectors, such as the technology and software sector — which have benefited from the pandemic as more people stay at home — are particularly in demand, bankers said. That trend was highlighted by Cisco Systems

in December 2020, when the U.S. tech giant paid $730 million in cash to buy London-based cloud-communications software company IMImobile

However, the COVID-19 pandemic has also heightened fears that hard-hit companies could be easy prey to foreign investors looking to gain access to cutting-edge technology or firms linked to crucial infrastructure.

Read: Bids to buy U.K. firms to get harder as ministers shut out ‘back door’ takeovers from countries like China

In November, U.K. regulators moved to be more in line with their counterparts in France, Italy and Germany, when they toughened up their takeover rules in an effort to prevent overseas companies from buying up sensitive assets, amid concern about the impact of China’s growing economic power. 

Related News  It’s 2:30 a.m. in Wyoming: ‘You’re holding a smartphone to let a husband say goodbye to his wife via FaceTime after 60 years of marriage’

Under the National Security and Investment Bill, ministers will have the power to retrospectively stop acquisitions any time in the five years after the deal was concluded.

The U.K.’s competition regulator said in January that it would start an investigation into technology company Nvidia’s

takeover of Arm, including looking at whether, following the takeover, the U.K. chip maker, which is owned by Japan’s SoftBank
will have an “incentive to withdraw, raise prices or reduce the quality of its IP [intellectual property] licensing services to Nvidia’s rivals.”

Read: How activist investors in U.K. stocks beat their counterparts in U.S. and Europe

Activist shareholders are also set to drive an increase in M&A as they land on company share registers, campaign for companies to sell parts of their businesses or engage in deal making to boost profits.

Dozens of U.K. listed companies are also at risk of shareholder campaigns from activist investors scouring the pandemic-ravaged economy for bargains. The U.K. now accounts for 37% of all global companies “at risk” of activist shareholder campaigns, according to a recent report from global professional services firm A&M.

For more updates check below links and stay updated with News AKMI.
Life and Style || Lifetime Fitness || Automotive News || Tech News || Giant Bikes || Cool Cars || Food and Drinks


Show More

Related Articles

Back to top button

usa news wall today prime news newso time news post wall