UK Public M&A Update Q3 2023

Overview

Takeover activity focussed on AIM companies

The UK public M&A market remained subdued in the third quarter. This was particularly true in the large cap space, where no £1bn+ offers were announced (Permira's £703m takeover of Ergomed was the highest value deal announced in the quarter). It is perhaps not surprising therefore that most activity was seen on AIM, with 7 out of the 10 announced firm offers being for companies whose shares are traded on AIM.

Interest rates reaching peak?

A number of the world's central banks signalled that interest rates are at or near their peak and, in late September, on a finely-balanced decision, the Bank of England resolved to maintain the bank interest rate at 5.25%, having earlier in the quarter raised rates by 25 basis points. This decision was largely driven by concerns that prior increases in interest rates were beginning to weigh on the UK economy, as well as lower than expected inflation figures for August. It remains to be seen whether the Bank of England's position offers more clarity on the cost of financing or whether a potentially deteriorating UK economy will continue to restrict the debt markets.

Spotlight on letters on intent

On a more technical note, letters of intent were in the spotlight this quarter following the withdrawal by a major shareholder of its letter of intent to support an offer shortly before the shareholder vote. As readers will know, letters of intent are typically given by institutional shareholders who are unable or unwilling to commit to accept an offer upfront.  Whilst letters of intent do not bind shareholders in the same way as an irrevocable undertaking, they have been used to good effect in recent months to demonstrate support for possible offers (for example on the possible offers for DX and STM Group). One of the benefits of an 'early' letter of intent is that it does not count towards the Rule 5 threshold (unlike an irrevocable undertaking). In both examples, offer terms were announced early to allow the target and bidder to engage with shareholders on value outside of the restrictions of the 'Rule of Six’.

Code jurisdiction

The quarter also saw an offer by a Berry Bros/Symington consortium for Hambledon Vineyard, an unlisted PLC. This serves as a useful reminder to practitioners that, even if not listed, an English public company may still be subject to the Takeover Code, and therefore that steps need to be taken at the outset of any acquisition of an unlisted PLC to determine whether the Takeover Code applies.

Ashurst UK Public M&A activity

The Ashurst UK public M&A team has continued to be active despite a quarter of relatively subdued activity with roles that include advising:

• Rothschild & Co on the take privates of Gresham House, DWF and Ergomed;
• J.P. Morgan on the acquisition of Round Hill Music by Concord;
• Moelis on the acquisition of Instem by ARCHIMED; and
• Cavendish on the acquisition of Osirium Technologies by SailPoint (a Thoma Bravo portfolio company).

A summary of the key features of each announced offer is set out in a table in the Appendix of this publication (which can be downloaded below).

Further details of these developments are set out in the News digest section of this publication (which can be downloaded below).

Download PDF: Ashurst Quarterly Public MA Review Q3 2023

The Ashurst UK Public M&A Team