Increase in M&A activity as American buyers acquire British technology companies

A surge in merger and acquisition (M&A) volumes has been observed, driven by US private equity firms showing interest in acquiring UK tech companies. Analysts attribute this trend to the perceived undervalued nature of the UK equities, making them an attractive option for American giants. The first half of 2024 saw a nearly triple increase in UK public M&A activity, with the number of deals reaching 27 from the previous 10, and the total deal value rising by 353% to £18.5 billion. Notably, bidders from the UK accounted for 41% of the total, closely followed by the US at 35%.

Patrick Sarch, head of UK public M&A at White & Case LLP, highlighted the increased interest of US bidders in the tech sector during the first half of the year. He further predicted a continued influx of bids for UK companies from both the US and corporate bidders, with key sectors like financial services, infrastructure, natural resources, and tech remaining active. The month of June recorded the highest volume of deals, including three tech takeovers within 24 hours.

The takeover frenzy in London’s tech sector saw American chipmaker Qualcomm acquiring London-listed semiconductor firm Alphawave for $2.4 billion, and New York-listed IonQ snapping up Oxford Ionics for $1.1 billion. Additionally, Spectris accepted a proposal from US private equity Advent for a £3.8 billion takeover. While these acquisitions reflect robust M&A activity, concerns have been raised about the impact on the London Stock Exchange’s ability to attract new IPOs.

Nikhil Rathi, chief executive of the Financial Conduct Authority, expressed concerns about the pricing of UK stock in a recent Treasury Committee hearing. He emphasized the attractiveness of UK companies to US buyers and highlighted the lower bid premiums being paid over market prices, pointing to greater variability in recent years.

Efforts by the Treasury to attract leading fintech firms for listings have not yielded the desired results, with UK fintech company Wise relocating its primary listing to the US. This move was motivated by a quest for a larger liquidity pool. The current state of UK stock pricing and the increasing interest from US buyers pose ongoing challenges to the UK market, prompting a closer examination of the implications on future M&A activities and capital markets.