UK Public M&A Review Q2 2024
16 July 2024
Welcome to our review of the UK public M&A market for the second quarter of 2024.
A link to download the full review can be found at the bottom of the page.
The UK Public M&A market continued to be active, with volumes increasing after a promising Q1. There was a significant flurry of activity in April and May, in particular, with 28 firm and possible offers announced in those months alone. The value of bids has also risen, hitting heights not seen since 2018. Strategic acquisitions continue to dominate across a range of industries leading to an uptick in share for share offers. Whilst private equity have been quieter in the small to mid-cap space, there was renewed interest in large-cap deals. We also noticed increased competition for attractive assets, with rival bids and significant premia being offered even on high value assets – the £3.57bn bid for International Distribution Services attracted a premium of 72.7%, whilst the £1bn+ competing bids for Spirent generated a premium of 85.9%.
Despite these signs of recovery, a degree of uncertainty remains in the market. Some large high profile bids have been withdrawn recently and an early election call dampened activity temporarily. There will also be some significant global political headwinds to navigate later in the year.
We are seeing targets and bidders use possible offer announcements more frequently. This is being driven by a number of factors. On the one hand, bidders and targets are wishing to engage with shareholders on value, beyond the rule of six, earlier in the process to shore up support. On the other, it is indicative of a more vigorous M&A environment, with target boards using the PUSU regime as a defence tactic and bidders seeking to force engagement by targets through "bear hug" announcements.
The rise in possible offer announcements also arguably explains the increase in lapsed bids – with more early stage discussions being made public before there is a realistic prospect of announcing a firm offer.
Bidders are increasingly utilising offer structures as a means of competing. In the case of Blackstone's bid for Hipgnosis, Blackstone's final increased offer was accompanied by a switch from an offer structure (with a 55% offer acceptance condition) to a scheme. This required Panel consent as the scheme structure was less technically deliverable, which was granted subject to certain conditions, including a requirement that Blackstone make a "follow-on offer" should the bid lapse in circumstances where the Panel believed the original contractual offer would not have lapsed. This pragmatic approach opens up the opportunity for bidders to take a more aggressive approach when faced with competing bidders, although debt financing terms may still restrict some bidders from dropping acceptance conditions below the 75% threshold.
In the last quarter, Ashurst's UK public M&A mandates included advising:
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.