Takeovers aren’t the reason the London Stock Exchange is shrinking
Takeovers like Schroders and Tate & Lyle grab the headlines but the far bigger problem for London is that there aren’t enough good companies arriving to replace them, says Henrik Persson
There is a familiar account of London’s stock market malaise. UK listed companies are cheap and deeper-pocketed overseas buyers have noticed. Each new approach or offer is treated as another chip from the foundations of the market. Beazley and Intertek supply the FTSE 100 quality angle. Schroders and Tate & Lyle bring the historic British names and long listed heritage. Senior, JTC and Bodycote represent another familiar type: serious, international, useful businesses that rarely trouble the public imagination until someone bids for them.
The focus is understandable because takeovers make a good story. A bid makes a splash with the potential for drama, the share price moves, shareholders are offered a premium, advisers of all sorts pile in. If the buyer is foreign, or private equity, the symbolism writes itself. Another example can be added to the argument that London is being hollowed out.
The difficulty is that this gives takeovers more blame than they deserve. Public companies have always left the market due to takeovers and that is not in itself a defect in public equity; it is instead part of the system. A company floats, raises capital, broadens its shareholder base, grows, acquires, distributes cash and, in time, may be acquired itself. In that healthy cycle, an exit crystallises value for shareholders who supported the business along the way. Taking part in this cycle is for many actually the very point of listing in the first place. A listed company is, by definition, available for investors to buy one share or offer to buy all of them.
London has always had healthy churn. ARM, Morrisons, Inmarsat, Meggitt, AVEVA, Dechra, Sophos and Blue Prism all left the market in different cycles and for different reasons. Some were national names, some were specialist businesses, and some were known mainly to investors and customers. A stock exchange is not a preservation order.
The numbers for 2026 so far are less dramatic than the mood implies. Our analysis of data available from Thomson Reuters database of Takeover Code activity involving UK-listed companies shows 25 firm offers in the first half of the year. Annualised, that would imply around 50 for the full year, below each of the previous three years: 60 in 2023, 58 in 2024 and 63 in 2025, and not out of line with the longer-term pattern.
Nor is the value mix especially unusual. Of those 25 firm offers, 16 were for companies valued below £250m, broadly in line with the long-run average in that dataset. Only five were for companies valued above £1bn, compared with 17 in 2024 and 11 in 2025.
‘Boards do not look for the exit’
The possible offer numbers are livelier. The dataset includes 34 possible offer situations in the first six months of 2026. Annualised, that would be higher than any full year in the dataset as far back as 2010. That may explain much of the atmosphere. But possible offers are not firm offers, and firm offers are not completed takeovers.
That distinction matters. A possible offer announcement, for example the ongoing discussions relating to easyJet, does not mean a company is inevitably on its way out of the market. These announcements can follow a bidder’s tactical decision to exert public pressure, or a target board’s judgement that disclosure and a timetable serve its interests. They can reflect leak concerns, strategic positioning, or simply the mechanics of a regulated market. Similarly, there have been many interesting situations in recent years where even firm offers recommended by the target board have been declined by shareholders or a tactical interception made by a competitor.
It has often been reported that London-listed companies trade at persistent discounts to international peers, and those discounts do attract bidders. Our experience however is that boards of London-listed companies are not universally looking for the exit. Nor is a sense of undervaluation especially new. It is a rare management team that believes the market has fully understood it. It is an even rarer one that says so after a bid. Nor would many investors want to back a board that thought the market had got everything about that company exactly right.
While these valuations undoubtedly attract bidders, they do also stiffen resistance. Boards and investors do not always regard the undisturbed share price as a fair reference point, particularly where they believe the market has failed to recognise the company’s prospects. A depressed rating may explain why an approach is made but it does not determine whether one should be accepted.
The better test is whether London can continue to support the ambitions of its listed companies while attracting enough good companies to replace those that leave. Takeovers matter but a market that allows exits is not failing by definition. The real measure is whether the next generation of companies still wants to enter. On that front, there are reasons for optimism. London’s IPO market is not yet where it should be but it is not dormant. EY recorded 23 IPOs on the London market in 2025, raising £2.1bn, a 170 per cent increase on 2024, with £1.9bn raised in the final quarter alone. PwC described 2025 as London’s strongest year for IPOs since 2021. At the same time, the UK has made the most significant changes to its listing regime in more than three decades, and KPMG’s latest survey found that eight in ten UK financial services leaders are confident that a London IPO recovery in 2026 can be sustained beyond the short term.
Follow-on issuance has also remained a useful reminder that UK public markets can still provide capital when the story and price are right. There are early signs, too, of private equity-backed companies and their sponsors testing public market optionality again. That matters because sponsors are pragmatic judges of exit routes. If they are looking again at London, it suggests the route may be becoming more credible.
The health of the market is not measured by the presence of household names. Many savers may not immediately recognise companies such as Intertek or Bodycote, but they are likely to have exposure to businesses like them through pensions, ISAs, tracker funds and other savings vehicles. Public markets are not made up only of consumer brands. They also contain the less visible companies that play a significant role in people’s everyday financial lives. Positivity about the public markets as a means of raising capital, raising profile, generating wealth, is absolutely critical.
Takeovers are therefore not the villain of London’s market story. They are part of any functioning public market. The better question is whether London can convert what it has and what is coming into a stronger flow of new companies. London still has the expertise, capital, infrastructure and international relevance to support ambitious companies. The task now is to give more of them a reason to choose it.
Henrik Persson is head of strategic PLC advisory at Cavendish