UK-listed companies are expected to be targeted for takeover by US buyout firms following the sterling slump, it was reported last week.
- Sterling slump will drive take-privates by US buyout firms, say reports
- Companies with strong cashflow, low debt and high margins are more prone to overseas acquisitions, according to research
- BT, DS Smith, Computacenter among the companies tipped to be under-watch
UK-listed companies are expected to be targeted for takeover by US buyout firms following the sterling slump, it was reported last week.
The UK’s new chancellor Kwasi Kwarteng triggered a fall in the British stock market and the sterling after delivering the country’s mini-budget two weeks ago.
The FTSE 100 Index was down 2% in a week and is trading at its lowest level in one and a half years.
The sterling saw a 4% drop on the day of the announcement, and although the market has picked up after the Bank of England’s £65 billionn-bond buying pledge, it has still yet to return to the level before the mini-budget announcement.
Buy-side interest from US private equity funds looking for undervalued take-private opportunities is expected to follow.
Dry powder within the private markets in the US has reached record high at $2.02 trillion as of September, according to the latest data by Preqin.
US buyout house Energy Capital Partners has recently landed a £1.3 billion deal to acquire listed British waste management company Biffa for 410 pence per share. The acquisition value represented a premium of about 28% on the closing price of 325 pence when the offer was made in June. However, the deal price was down £100 million from what it was valued at June.
Other major US-based buyout groups are also circling the UK M&A market.
Software-focused buyout firm Thoma Bravo opened its London office last month as its first one outside the US. Buyout giant Clayton, Dubilier & Rice also bought into UK supermarket chain Morrisons, while CVC took Stock Spirits over in a roughly $1 billion deal last year.
According to data from the Office for National Statistics, the total value of inward mergers and acquisitions of UK companies made by foreign companies in Q2 increased £0.5 billion to £16.1 billion from the previous quarter.
UK public companies with strong cashflows, low debt and high margins will be more prone to overseas acquisitions, according to a report by The Times last week. The newspaper published a list of potential targets, with 42% of companies from the industrial sector, including packaging company DS Smith, IT firm Computacenter, engineering company IMI and cybersecurity business NCC.
Telecoms and tech companies will also be on the radar for overseas buyers, reported Bloomberg. Top of the list is BT Group alongside Entain, Playtech, Burberry Group and Darktrace, which Thoma Bravo declined to takeover earlier in the month, it reported.
Listed consumer brands that are exposed to the impact of rising import costs and interest rates will also see interest, according to City sources quoted by The Guardian newspaper. Prime candidates include Halfords and Ocado, it reported.
Key Takeaway | UK-listed companies in industrials, telecoms and technology could be potential acquisition targets while consumer brands could be targeted for their low valuation.
