UK M&A activity sweeps market with £5.3bn of deals

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

UK dealmaking activity accelerated this week with the announcement of four takeover offers worth a total of £5.3bn, underlining the country’s position as Europe’s foremost destination for mergers and acquisitions this year.

On Friday, the board of TI Fluid Systems, a FTSE 250 car parts manufacturer, recommended that shareholders vote in favour of a £1bn offer from Canada’s ABC Technologies, which is backed by Apollo Global Management.

This followed a £701mn bid by Macquarie for waste-management group Renewi on Thursday and a £351mn purchase of pub and restaurant chain Loungers by Abu Dhabi-backed Fortress Investment Group.

On Wednesday night, Direct Line also said it had rejected a £3.3bn bid from larger rival Aviva, prompting the FTSE 100 insurer to approach shareholders about its offer.

The flurry has underscored the UK’s position as the most active hub in Europe for deals so far this year. Activity has accelerated following October’s Budget, as dealmakers have more certainty to push ahead with transactions before the end of the year.

The value of mergers and acquisitions involving UK companies, whether buying or selling, has hit $306.3bn so far this year, a 57 per cent increase on the same period last year, according to data from Dealogic.

Activity among UK companies has outstripped that of the rest of Europe since the beginning of the year, with the value of total M&A activity during the same period in Germany, France and Italy at $143.2bn, $142.3bn and $91bn, respectively.

“We’re certainly going to see a lot more activity because there’s a rebalanced market that now takes into account current interest rates and where valuation levels are,” said Kirshlen Moodley, UK head of advisory at BNP Paribas.

“The UK is selectively strong . . . definitely the market is much more robust versus the same period last year at this time,” he added, noting that share valuations have long been much lower than in the US.

“[It] will always be an attractive market because it trades at that structural discount to US peers,” said Moodley.

The uptick in UK M&A activity may allay concerns of a slowdown under Keir Starmer’s government, which has frustrated businesses with last month’s £40bn tax-raising Budget.

The CBI lobby group said this week that almost half of the businesses in a recent survey were reducing headcount after the Budget, which concentrated the tax rises on the private sector.

Iain Fenn, a partner at Linklaters, said that, despite such concerns, “people generally see a more stable environment in the UK”.

“Last year was terrible. There were lots of people looking at deals but we couldn’t execute anything,” Fenn said. “This year you’ve seen steadily rising confidence through the year.”

Steven Fine, chief executive of stockbroker Peel Hunt, said London markets were “in the embryonic stages” of a rebound in corporate dealmaking. “[M&A] is not going away,” he said. “Our pipeline is good.”

In half-year results posted on Friday, Peel Hunt reported a pre-tax profit of £1.2mn, compared with an £800,000 loss the previous year, thanks in large part to a resurgence in UK dealmaking and work on two public listings. Group revenue jumped by more than a quarter to £54mn.

However, Fine warned the outlook for IPOs remained bleak, saying the likelihood of a surge in London listings was “limited”, as consistent outflows from UK equities were “draining away support and causing valuations to stay low”.

M&A is “great, but you’re losing companies”, he said, noting that 100 London-listed groups will either have been bid for, delisted or taken over this year.

The rise in dealmaking activity has also been lucrative for London-based advisory firms. On Thursday, boutique advisory group Robey Warshaw reported record revenues and profits for its latest financial year on the back of a surge in deals, netting its four partners a share in a £70mn profit pool.