Takeover fever grips the City: Private equity giants swoop

Takeover fever is gripping the City as private equity predators circle some of Britain’s biggest companies.

In the space of under 18 hours between Thursday afternoon and yesterday morning, another three London-listed companies were caught up in the M&A, or merger and acquisition, frenzy.

Shares in veterinary group Dechra Pharmaceuticals soared 33 per cent after it revealed it was in talks with private equity group EQT over a possible £4.6billion deal.

Fellow FTSE 250 firm Network International was approached by a consortium of CVC Partners and Francisco Partner Funds while property company Industrials REIT backed a £500m takeover by Blackstone.

The takeover activity – on top of a host of other bids and approaches so far this year involving firms including Dignity, Hyve and John Wood Group – has raised concerns that British companies are being snapped up on the cheap.

Fevered: In the space of under 18 hours, another three London-listed companies were caught up in the M&A, or merger and acquisition, frenzy

And with takeovers leading to the removal of companies from the stock market, there are mounting fears over London’s reputation at a time when the exchange is struggling to attract the biggest firms.

Takeover interest in UK companies picked up during Covid as bidders looked to take advantage of depressed price tags and the weak pound in a wave of ‘pandemic plundering’. G4S, the AA, Morrisons and Ultra Electronics have been among firms sold in recent years. And this pattern has lingered into the post-pandemic world as a slew of ‘opportunistic’ investors flock towards London’s knock-down prices.

Fourteen British companies have been approached with takeovers from private equity since the beginning of 2023, with more in the works. Victoria Scholar, an analyst at Interactive Investor, said: ‘There’s a sense among international investors that the UK is ripe with M&A targets.’

She said the recovery in the pound this year has encouraged ‘opportunistic investors’ to ‘pounce on targets before it is too late’.

The takeover spree comes amid concerns about the future of the stock market in London. Holiday Inn owner Intercontinental Hotels Group this week warned that it was ‘not a very attractive place’ to be. Cambridge-based chip designer Arm has opted to float its shares in New York and CRH, the biggest building materials company in the world, is shifting its listing across the Atlantic.

Danni Hewson, analyst at AJ Bell, called the current feeding frenzy a ‘huge concern for the Government and the London Stock Exchange’.

Some shareholders are fighting back, however.

London-listed events organiser Hyve backed a £481m takeover by US-based Providence Equity Partners in February. But top 20 shareholders M&G, Redwheel, and Blackmoor Investment Partners, have spoken out against the deal. If investors holding enough of the share vote against the takeover, it will collapse.

‘At the moment, UK pensioners and shareholders are at risk of being short-changed if we allow bidders to buy companies at the UK’s currently discounted level when compared to European, US, and other global peers,’ a spokesman for Blackmoor said.