Foreign bidders are pouncing on UK targets at breakneck speed as CEOs look to expand into new markets and drive growth to position themselves for the post-pandemic world. The value of UK deals has soared to $ 29 billion so far this year, already three times. the total of $ 8.7 billion for the same period in 2020 and the highest number since 2000, according to Refinitiv data.
“The monetary stability provided by Brexit, combined with the material undervaluation of the London market and COVID hit mainly UK domestic companies such as services and retail, has unleashed a tsunami of private equity with euro-denominated funds and dollars or foreign strategic buyers to pursue multiple UK targets across multiple sectors, ”said Philip Noblet, UK investment banking director at Jefferies JEF, + 4.86%. “Private equity in particular, with a mountain of capital and high leverage available at low cost, sees UK public companies as an excellent source of targets that can be used as platforms for growth,” he added. Read: Why mergers and acquisitions will continue their streak in 2021 Apple AAPL, + 0.11% -supplier Dialog Semiconductor 0OLN, + 16.83% became the latest company to attract the interest of foreign buyers after it agreed to a $ 6 offer billion in cash from Japan’s Renesas Electronics 6723, + 1.75% on Monday. The deal comes amid a surge in deals between global chipmakers, whose products are in high demand as more people stay home amid the COVID-19 pandemic. Meanwhile, Aggreko AGK, + 0.24% said on Friday it is in talks with a private equity consortium, which includes TDR Capital and US infrastructure investor Squared Capital, about a possible all-cash takeover offer of 880p per share. , valuing power. equipment maker at around £ 2.2bn. The company said discussions are ongoing. Bankers said there were several reasons behind the resurgence in activity, including pent-up demand from bidders who had stopped their ambitions to do business at the height of the pandemic, while moving to protect their balance sheets. Read: Meet the Top 50 Negotiators in European M&A The launch of COVID-19 vaccine programs in several countries, including the US, UK and Europe, has also encouraged CEOs to take advantage of low valuations of London-listed companies, many of which trade at a discount to their global peers, to intensify their expansion efforts in international markets. “We have seen surprisingly resilient UK 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 therefore the outlook remains strong, ”said Ian Hart, Co-Chairman of UK Investment Banking at UBS UBS. + 2.75%. UK equity markets have also enjoyed the resurgence of confidence, with several companies making their equity market debuts on the LSEG London Stock Exchange, -0.50% in recent weeks. Read: Online sales boom during pandemic propels personalized card company Moonpig to $ 1.4 billion Stocks in iconic British boot maker Dr. Martens DOCS, + 1.30% and card retailer from Moonpig MOON online greeting, -0.34% soared 22% and 29% respectively on its first day of trading, highlighting investors’ appetite for businesses that have thrived during the pandemic. But increased interest in UK companies means that some goals are harder to achieve. In January, the US casino group MGM MGM, + 3.94% abandoned its attempt to buy Entain ENT, -0.42%, the sports betting and games group that owns the Ladbrokes and Coral bookmakers, after your total shares is £ 13.83 pence per share. The offer was vigorously 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 negotiate with potential bidders to try to achieve the highest possible selling price for their own shareholders. Last week Signature Aviation SIG, -0.32% agreed to a $ 4.7 billion acquisition of a consortium comprised of Blackstone BX, -0.41%, Global Infrastructure Partners and Cascade, the investment vehicle owned by Microsoft MSFT, + 0.11% founder Bill Gates, then rival bidders came together to mount a joint bid. Coronavirus-resistant sectors, such as the technology and software sector, which have benefited from the pandemic as more people stay home, are in particular demand, the bankers said. That trend was highlighted by Cisco Systems CSCO, + 1.79% in December 2020, when the American tech giant paid $ 730 million in cash to buy London-based cloud communications software company IMImobile IMO. However, the COVID-19 pandemic has also heightened fears that the worst-hit companies may be easy prey for foreign investors looking to gain access to cutting-edge technology or companies linked to crucial infrastructure. Read: Offers to buy UK companies get tougher as ministers close ‘back door’ acquisitions of countries like China In November UK regulators moved to be more in line with their counterparts in France, Italy and Germany, when they tightened their acquisition rules in an effort to prevent foreign companies from buying sensitive assets, amid concerns about the impact of China’s growing economic power. Under the Investment and National Security Bill, ministers will have the power to retrospectively stop acquisitions at any time during the five years after the agreement is concluded. The UK competition regulator said in January that it would initiate an investigation into NVDA of technology company Nvidia, + 6.24% from Arm’s acquisition, including whether, after the acquisition, the UK chipmaker, which is owned by SoftBank 9984 of Japan, +3.41%, will have an “incentive to withdraw, raise prices or reduce the quality of their IP [intellectual property] licensing services to Nvidia rivals. “Read: How activist investors in UK stocks outperform their counterparts in the US and Europe Activist shareholders are also poised to drive a surge in mergers and acquisitions as they land on company stock registers, campaign for companies to sell parts of their businesses, or engage in trading to boost profits. Dozens of publicly traded companies in the UK are also at risk of shareholder campaigns from Activist investors looking for bargains in pandemic-ravaged economy The UK now accounts for 37% of all global companies “at risk” from activist shareholder campaigns, according to a recent report by global professional services firm A&M.