Debbie Crosbie led Nationwide’s acquisition of Virgin Money (pics: Terry Murden)
2024 has seen a surge in takeover activity as bidders took advantage of unloved or undervalued companies, writes DAN COATSWORTH
Takeovers in the UK moved up a gear in 2024 as he country’s bigger companies became the target of predators. A bounty of unloved or under appreciated companies were swept off their feet, signalling the UK market as being ‘on sale’ and showing there was widespread value on offer.
The average value of deals was £1.07 billion, nearly three times higher than the £390 million average in 2023. In total, there were £49 billion worth of recommended bids versus £17.2 billion last year.
Five FTSE 100 companies and 19 stocks in the FTSE 250 index received bids, the bulk of which were successful. That’s remarkable given last year there were only three FTSE 250 takeovers and none among FTSE 100 stocks.”
It took a few attempts to get certain deals away, but there is a right price for every listed company and it was just a case of doing the M&A dance on price negotiations until the stars aligned.
Investors on the receiving end of a bid have cottoned on to the fact that many predators are not giving up if their first offer is turned down. That’s given many shareholders confidence to say no at the initial bid and ask for more – because, in most cases, they are getting it.
Just look at how quickly Aviva stumped up more cash for Direct Line. It made two bids and got a recommended offer in no time. Many couples spend months or years getting to know each other before marriage, but this courtship took just weeks.”
Deal shape and size
Bidders know the structure of a deal is important, hence why the majority of 2024’s UK takeovers were all-cash offers. Cash is king and investors would prefer something in their hand than paper, or a mixture of the two. Only eight successful deals involving UK-listed companies in 2024 were structured in shares and cash, while a mere three were all-share deals.
The average bid premium was 45%, slightly less than the 2023 average but still a nice sweetener for investors on the receiving end of an offer. The term ‘bid premium’ describes the extra amount (in percentage terms) the buyer offers compared to the market value on the night before the takeover approach went public.
If you consider the FTSE 100 has returned in the region of 11% this year including dividends, investors with a takeover in their portfolio in 2024 effectively received the equivalent of four years’ worth of UK stock market returns upfront.”
Common themes among UK takeovers
There was a common thread among UK takeovers in that many bidders thought a company was worth much more than attributed by the market. Buyers typically take a multi-year view on a company, whereas the collective stock market is often short-term in its thinking.
For several years it’s been clear that unless the market attributed fair value, companies would be picked off one by one via takeovers. That trend remains in motion and could continue across 2025 unless investors are happier to pay a higher price for UK shares and bargain situations diminish.
Britvic and TI Fluid Systems are good examples of where the buyer spotted an opportunity to gain scale in their respective market through acquisition. Carlsberg was looking for ways to strengthen its footprint in Western Europe and be a bigger player in non-alcoholic drinks, and Britvic ticked all the right boxes. ABC Technologies buying TI Fluid Systems will expand its global footprint and broadens its customer base.
On several occasions, bids came from an existing shareholder who subsequently decided they’d like to own the whole company. Pre-bid, Joshua Alliance and his family (plus associates) owned more than half of clothing retailer N Brown. He took the view that the company would be better served as a private business, away from the spotlight of the stock market and without the listing costs.”
Unsuccessful takeover attempts
Fifteen UK-listed companies fought off takeover approaches during 2024 including two from the FTSE 100 – Anglo American and Rightmove. In both cases and the same for fellow bid ‘survivor’ Currys, the stocks have gone on to trade on higher multiples of earnings.
The bid activity acted as a wake-up call for investors that the stocks had something to offer. Rigorous bid defence can cause investors to reappraise a stock – they wonder why the board has rejected a bid (or multiple bids) and take a deeper look. In the case of Anglo American, Rightmove and Currys, it’s clear that investors’ curiosity has been piqued after bids were blocked.
Anglo American now trades on 16.5 times its next 12 months’ forecast earnings versus 12.4-times on the eve of BHP trying to buy the miner. Part of Anglo American’s bid defence was to announce a sharper focus on fewer commodities and to exit certain areas including diamonds. The market liked this plan and that will have contributed to its subsequent equity re-rating.
Rightmove saw its valuation multiple move from 19.7 times forward earnings immediately before REA’s bid interest to now trade on 23.3-times. The bid was a reminder that the UK stock market contains high quality companies, many of them leaders in their field such as Rightmove. Sometimes all it takes is a bid to remind people what’s on offer.
As for Currys, it was clear that the electronics retailer’s board had no interest in being acquired, which led US investment firm Elliott Advisors to walk away after making several takeover attempts. Additional bid interest from China’s JD.com didn’t amount to anything, but investors were curious as to why Elliott was so eager to own Currys.
Currys’ shares now trade on 8.3 times forward earnings versus 5.5-times on the eve of Elliott’s first approach, with the re-rating amplified by positive news flow. The frenzy around all things to do with AI has created a tailwind for Currys because electronics manufacturers are launching AI computing products and the public seems keen to snap them up.”
Who could be the next bid target?
One of the perfect recipes for a takeover is a company with decent scale but whose share price is drifting sideways or downwards as the market frets about near-term headwinds. That was precisely the case with Rightmove, DS Smith and International Distributions Services before they received bids this year.
Whitbread falls into this category – its share price is struggling to make progress because the market is worried about near-term UK growth opportunities. Fundamentally, Premier Inn is one of the UK’s most loved hotel brands and Whitbread is making progress in replicating this success in Germany, albeit from a low base. Whitbread would be an obvious takeover target if it wasn’t for the fact the shares are not particularly cheap.
Instead, there are two other names which look like more credible takeover targets because the shares are both weak and cheap, and the companies have redeeming qualities which could interest a buyer taking a longer-term view.”
Potential takeover: ITV
ITV’s shares have languished in the doldrums amid a hangover from the Hollywood strikes which disrupted TV and film productions, as well as uneven advertising income. There has been perennial chatter about ITV being a bid target but, for once, it feels credible.
Private equity, a rival broadcaster or even a streaming platform could show interest in ITV. Its Studios content arm is the hidden gem in the business, potentially worth more than the market value of the entire group. Someone like Netflix could gobble up ITV for a fraction of its annual content spend and access its rich library of programmes.
The ITVX platform is proving to be stronger than originally expected and it is providing valuable insight into customers and their viewing habits, exactly the type of in-depth data that convinces big brands to advertise on the platform as they can target certain people efficiently.
ITV’s shares currently trade on just eight times forward earnings. Pre-pandemic it often traded in the region of 12 to 15 times.”
Potential takeover: B&M
Brothers Simon, Robin and Bobby Arora bought B&M 20 years ago as a struggling chain of 21 stores. They worked their magic and made B&M into a UK and French retail giant with more than 1,000 sites. It has been a disruptive force in discount retail and its roll-out opportunity still has legs.
Simon Arora bowed out in 2022 after 17 years running the business, Robin Arora seems to have become hands-off and now Bobby Arora is preparing to leave in 2025.
It’s the end of an era for the business, and precisely the time when a bidder might fancy their chances of making an offer, given the changing of the guard.
The shares have been weak because a poor first quarter was followed up by soft trading in the second quarter. The company recently lost its place in the FTSE 100 and investor sentiment is weak. It’s at times like this when a predator could pounce.
B&M trades on seven times EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation) and a PE (price to earnings) ratio of 9 based on 12-month forward earnings. Those are undemanding valuations and leave plenty of room for a bidder to offer a nice premium to the market value to seal the deal.
| FTSE 100 TAKEOVER OFFERS IN 2024 | ||
| Company | Status | |
| 1 | Anglo American | Rejected |
| 2 | Darktrace | Completed |
| 3 | DS Smith | In progress |
| 4 | Hargreaves Lansdown | In progress |
| 5 | Rightmove | Rejected |
| FTSE 250 TAKEOVER OFFERS IN 2024 | ||
| Company | Status | |
| 1 | Ascential | Completed |
| 2 | Balanced Commercial Property | Completed |
| 3 | Britvic | In progress |
| 4 | Centamin | Completed |
| 5 | Crest Nicholson | Rejected |
| 6 | Currys | Rejected |
| 7 | Direct Line | In progress |
| 8 | Elementis | Rejected |
| 9 | Hipgnosis Songs Fund | Completed |
| 10 | International Distributions Services | In progress |
| 11 | Redrow | Completed |
| 12 | Renewi | In progress |
| 13 | Spirent | In progress |
| 14 | TI Fluid Systems | In progress |
| 15 | Tyman | Completed |
| 16 | UK Commercial Property | Completed |
| 17 | Virgin Money | Completed |
| 18 | Wincanton | Completed |
| 19 | Wood Group | Rejected |
| Source: AJ Bell, company announcements | ||
Dan Coatsworth is an investment analyst at AJ Bell
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