Bargain Britain: UK firms under siege by foreign takeovers
The London Stock Exchange has suffered a bruising week as private equity firms and foreign giants continue to snap up British bargains.
Markets were hit with a double blow on Wednesday after Canadian consultancy giant acquired engineering firm Ricardo and KKR returned with a final bid for GP Landlord Assura.
Assura has recommended a cash offer from Sana Bidco after a near-year long bidding war with Primary Health Properties. Meanwhile, WSP swooped in with a £281m acquisition deal for Ricardo.
These latest developments follow a devastating start to the week with a trio of tech takeovers from US giants and private equity firms topping £6.3bn.
Nikhil Rathi, chief executive of the Financial Conduct Authority, told the Treasury Committee on Tuesday a “range of issues” were weighing on the British market.
“There is this question around how attractive UK companies have become, particularly to US buyers,” Rathi said, adding that the UK’s listing rules were not to blame for a lack of IPOs.
Research from Peel Hunt in April showed 15 companies on the London Stock Exchange worth over £100m had faced acquisition bids since the start of 2025. Meanwhile, not a single firm worth over £100m floated in that time.
Overseas bidders represented 47 per cent of the bids, totalling nearly £9bn.
Cheap stock attracts bargain hunters
Dan Coatsworth, investment analyst at AJ Bell, told City AM: “Foreign firms are attracted to UK stocks because they’re cheap and for trade buyers they can offer an inexpensive route into a new geography.”
The FTSE All-Share traded at 13 to 16 times expected company earnings between 2015 and 2020.
This dropped to 9.2 times in 2022, which Coatsworth said made “UK stocks cheap and undervalued”.
Valuations have begun a steady recovery at 12.3 times earnings but still remain below the pre-Covid average.
“This ongoing undervaluation has helped fuel a wave of takeovers, as buyers see good value in UK-listed companies,” Coatsworth said.
He added regular investors would need to start valuing UK companies more highly, else “the M&A juggernaut might keep trucking along”.
Government policy holding investors back
Dan Moczulski, UK managing director at eToro reiterated this, telling City AM the “lukewarm investor sentiment towards the UK” had also resulted in firms being valued lower than they should be.
Both Moczulski and Coatsworth cited the removal of stamp duty on shares as a clear way to drive investor appetite, along with modernising ISA rules, a move also championed by Peel Hunt CEO Steven Fine.
Moczulski said: “Those fundamental changes would lift the health of UK capital markets and make Britain a more attractive place to list, and stay listed.”
But investors’ concerns were raised last month after a leaked memo from Deputy Prime Minister Angela Rayner called for closing the commercial property stamp duty loop and removal of inheritance tax relief on AIM shares.
Calculations from The Telegraph said this would raise up to £2bn.