UK takeovers surge in 2024 as bidders circle the FTSE 100 and FTSE 250

UK takeovers moved up a gear in 2024 as predators targeted bigger companies. 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.

A bounty of unloved or underappreciated companies were swept off their feet, signalling the UK market as being ‘on sale’ and showing there was widespread value on offer.

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.

Source: AJ Bell, company announcements, as of 12 December 2024

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

15 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.