Public to Private Transactions
With 2024 being the year of elections around the world and valuation gaps remaining a challenge, you could be forgiven for thinking that potential buyers might hold fire on bids for UK public assets. Instead, owing in part to a rush of firm offers announced towards the end of Q4 2024, the total number of public bids announced in 2024 for Main Market or AIM-listed companies was 56, only one short of the total in 2023.
Of these 56 bids, 24 were made by buyers backed by private equity and other funds (43%), compared to 36 of 57 bids made in 2023 (63%) (“P2Ps“). Key reasons for this fall in P2P activity include the slower than expected rate of decline in interest rates and the return of strategic buyers.
Whilst financial and technology listed companies remained popular last year, there was notably less activity in the healthcare sector, potentially reflecting buyer enthusiasm returning to more normal levels following a significant COVID-era uptick in interest in the healthcare sector. There was significant interest in real estate, construction and industrial sector businesses. Several listed UK Real Estate Investment Trusts (“REITs“) were subject to offers, which is unsurprising given they have continued to trade at significant discounts to their net asset value (“NAV“), stifling property investment managers and reducing liquidity in their shares. The REIT market saw notable consolidation, with buyers looking to benefit from cost synergies and de-listing savings.
30 of the 56 companies subject to public bids were listed on the Main Market (54%), compared with 18 of 57 in 2023 (32%), consistent with 2024 being the year big-ticket public M&A returned. Offers with a deal value over £1bn increased from just 4 in 2023 (7%) to 17 in 2024 (30%).
Valuation gaps between target boards/shareholders and bidders continued. We saw several examples of shareholders privately and publicly objecting to bid prices, and encouraging target boards to ‘go shop’ for possible interlopers at a higher price. Despite this, only 5 of the 56 bids (9%) were subject to increased offers. All-share and partial-share offers remained popular (both listed and unlisted) as one way of attempting to bridge the valuation gap with target shareholders.
On the flipside, we saw examples of ‘bear hug’ announcements made by buyers in an attempt to prompt target shareholders to encourage the target board to engage, where a recommendation is not forthcoming.
Looking further into 2025, we expect deal activity to remain strong, and we continue to see a healthy pipeline of interest in UK-listed assets from both private equity backed and strategic buyers. Relative political stability caused by definitive results in both the UK and US elections and stabilising/slowly reducing interest rates should encourage buyers to explore M&A. A significant number of AIM-listed companies are likely to feel vulnerable to approaches as boards continue to navigate a challenging equity capital markets environment.
The Travers Smith corporate team advised on just under 20% of all UK public bids in 2023. Our full 2024 UK Public M&A Trends brochure is available online now.
