Dealmakers are limbering up for an offensive in London after a wave of new firms fell into the sights of buyers in the year’s opening months and “FOMO” grips the market, top City advisors have said.
A total of 12 companies were subject to takeover bids between January and March, with seven members of the FTSE 350 now under offer, signalling a potential rebound in confidence among buyers.
Deals insiders say that private equity firms and corporates were likely to begin feeling a “fear of missing out” as more bids begin to land on UK firms.
“We are seeing the start of a ‘snowball’ effect as clients see the activity and have “Fear of Missing Out” after a period of not being able to do M&A,” Stuart Ord, head of M&A at investment bank Numis, told City A.M.
“There are several competed situations in the market and there has been a high level of possible offers being made.”
The biggest bid to land so far this year was the £5.1bn offer for box maker DS Smith from rival Mondi in February. A bidding war for the firm is now threatening to erupt after Memphis-based International Paper the deal and said it was weighing up a counter bid.
Mergers and acquisitions remain subdued on historical levels, weighed down by interest rates and price swings, but the prospect of rate cuts this year could begin tempting buyers back into the market, according to advisors.
“There is pent-up demand on both the sell and buy side, ready to transact,” said Gavin Davies, head of Herbert Smith Freehills’ global M&A practice. “We would expect to see confidence growing with more deals announcing, as macro-economic conditions improve and financing markets recover.”
However, there was still “caution” over the timing and pace of the recovery, he added.
Alasdair Steele, a corporate Partner with law firm CMS, said the impact of elections in the UK and US may also temper a full resurgence this year.
“Deal action has continued to be subdued, but there is an increasing feeling of optimism that markets are going to open up, although probably not in any significant way before the summer,” he added.
“The big question is whether we will have an increase in deals happening before the UK and US elections or whether it will be Q1 2025.”