UK Public M&A Review Q2 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.

Overview

M&A continues despite the early election call

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 Some large high profile bids have been withdrawn recently and an early election call dampened activity temporarily.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.

Possible offer announcements being used tactically

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.

Flexible structuring

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.

Mandates

In the last quarter, Ashurst's UK public M&A mandates included advising:

• Nyetimber Wines on its offer for The Lakes Distillery Company plc.
• J.P. Morgan on (1) Shurgard Self Storage Ltd's offer for Lok'n Store Group plc, (2) Concord Chorus Limited's offer for Hipgnosis Songs Fund Limited, (3) the EP Corporate Group & J&T Capital Partners offer for International Distribution Services plc and (4) Houting UK Limited's offer for Keywords Studios plc.
• UBS on Quanex Building Products Corporation's offer for Tyman plc.
• Lazard on K1 Investment Management's offer for MariaDB plc.
• Goldman Sachs on Thoma Bravo's offer for Darktrace plc.
• Cavendish on Bloom Equity Partners' offer for GRC International Group plc.
• Jefferies on Bridgepoint Advisers Limited's offer for Alpha Financial Markets Consulting plc.
• Zeus Capital on PI Industries Limited's offer for Plant Health Care plc.