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London M&A market gets confidence injection with flurry of takeovers

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London’s mergers & acquisitions market has been on a rally lately and more takeovers may be in sight under the Christmas tree.


A significant chunk of these transactions saw bigger players looking to add success stories to their portfolio, alongside a series of struggling firms going private as one would expect in times of crisis.


READ: Britain looks at relaxed listing rules and takeover blocks to encourage tech companies post-Brexit


Just on Monday, IMImobile PLC (LON:IMO) agreed to a US$730mln offer by IT giant Cisco Systems Inc (NASDAQ:CSCO).


The London-based cloud communications software specialist, which was included as a supplier on the UK government’s ‘G-Cloud 12’ framework in October, was sought to enhance Cisco’s customer experience.


Meanwhile, internet of things firm Telit Communications PLC (LON:TCM), which taps into the booming 5G market, continues to negotiate with both Swiss computing firm u-blox and private equity firm Dbay about possible offers.


These are only some of the most recent ones, as the five weeks to November 25 saw a grand total of 14 takeover deals, which included RSA Insurance Group PLC (LON:RSA) emigrating to Intact Financial Corporation for GBP7.2bn.


There were also videogame developer Codemasters Group Holdings PLC (LON:CDM), recommending US giant Take-Two Interactive’s (NASDAQ:TTWO) GBP726mln offer, and media firm Future PLC (LON:FUTR), which agreed to acquire GoCompare price comparison site owner GoCo Group PLC (LON:GOCO).


According to Russ Mould, investment director at AJ Bell, this may suggest that “someone, somewhere thinks there are some UK-listed companies going cheap”.


“The average premium offered for the targets is 46% so any investors who owned some of them will be feeling pretty happy with themselves. They may even start to wonder who could be next on the block, given that the FTSE All-Share still trades 15% below its May 2018 peak,” he noted.


According to Henrik Persson, corporate finance director at broker finnCap Group PLC (LON:FCAP), companies have now more visibility so they are more confident in developing their strategies.


In fact, those firms coming out of the pandemic badly are looking to sort themselves quickly, whereas the winners have a newfound strong position to fortify and can find convenient deals.


There’s also an element of herd mentality, Persson told Proactive, as well as catch-up of deals that were parked at the start of the year.


“As a rule of thumb, because of the strategic value of an asset to the buying company (rather than a narrow financial analysis), strategics are generally more willing than financial sponsors to pay up and to cut through the valuation gap (i.e. what a buyer is willing to pay and what public market investors are expecting, and looking past any short-term fluctuations),” he concluded.


Meanwhile, Britain is looking at changes to listing requirement to attract more tech companies and maintain its position in the global financial services market post-Brexit.


One of the key points will be blocking shares, which are short of a dual-listed structure but will protect a company from initial takeover threats once going public.

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