M&A

Will the surge in PE-backed take private deals continue?

Alexander Thomas, Managing Director, Mergers & Acquisitions, Europe


Takeovers of UK-listed companies have soared in recent months. With record levels of capital available and the appetite to deploy it, the surge in UK-listed takeovers show no signs of slowing down.

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By Alexander Thomas
Published July 6, 2021 | 3 min watch
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Key Points

  • With record levels of capital available and the appetite to deploy it, the surge in PE-backed take private deals shows no signs of slowing down.
  • The UK markets are open and active, with investors attracted by low valuations and actionable opportunities right across UK plc.
  • However, as cash-rich buyout firms search for more listed businesses to take private, there are concerns the UK’s public equity markets are underpriced and undervalued.

In a year of accelerating change across the M&A landscape, one of the most striking trends has been the surge of PE-backed take private deals in the UK and Europe. PE-led activity accounted for over 30% of all global deal value in Q1 2021, with UK and European deal value and volume hitting record highs – a remarkable reflection of the levels of capital available and the appetite to deploy it.

According to Alexander Thomas, Managing Director, Mergers & Acquisitions, Europe, all signs now point to a continued surge in activity in the second half of 2021. “On the supply side, there's a record $1.7 trillion of dry powder available, with about $250 billion in Europe and the UK, where the market is popular right now for a number of reasons. Investors are seeing attractive valuations the UK, an open market where almost all companies are available and actionable at the right price. We're seeing a lot of activity, particularly for hard assets like real estate and infrastructure, as well as across high-growth sectors like healthcare.”

“Investors are seeing attractive valuations in the UK, an open market where almost all companies are available and actionable at the right price.”

Alexander Thomas, Managing Director, Mergers & Acquisitions, Europe

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The confluence of factors that have contributed to this surge in activity are unlikely to go away anytime soon, fuelling the demand side of the M&A equation, says James Agnew, Chairman, Corporate Broking. “On the demand side, the UK economy has recovered well with the success of the vaccination programme – particularly in the mid-cap sector, where there are a lot of travel and leisure companies and many have seen a sharp bounce-back. Another key factor is that UK governance is seen to be pretty good with strong disclosure levels, so that makes for an environment where buyers have confidence about the companies they're acquiring.”

However, as cash-rich buyout firms search for more listed businesses to take private, there are concerns the UK’s public equity markets are underpriced and undervalued. “UK investors have felt for a long time that the market was undervalued, with extended periods of concern over Brexit and now COVID-19,” continues James. “There are other structural reasons why the UK market often trades at a discount to US markets, in particular. Part of that is because the UK tends to have more of a value bias and there are more growth companies in the US, so there has always been a significant valuation gap.”

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