The UK’s capital markets require “urgent” support from the government, Peel Hunt has said, as the London Stock Exchange continues to be raided by private takeovers.
While there have been 15 companies worth over £100m facing acquisition bids on the stock exchange since the start of 2025, not a single firm worth over £100m floated in that time, data from the investment bank revealed.
Overseas bidders have represented 47 per cent of the bids, which total around £9bn.
“The UK small and midcap market continues to be depleted at a concerning rate, particularly given the lack of IPO activity,” said Peel Hunt head of research Charles Hall.
Of all 15 takeover bids, six have been in the FTSE 250, while four have been in the FTSE Smallcap and four on the junior stock exchange AIM. There have been no bids for FTSE 100 firms so far.
As a result, Hall said it was “essential that the government urgently address” the problems facing the stock exchange, suggesting solutions such as pension reform, ISA reform, establishing a national wealth fund, and addressing stamp duty.
The steady shift from strong capital markets to a “happy hunting ground for both corporate and private equity bidders” has come thanks to low valuations and willing sellers, Hall explained.
Small stock exchanges are worst affected
The London Stock Exchange has been suffering for years from a drought of IPOs and frequent takeover attempts, but smaller companies on the market have been particularly affected.
The FTSE Smallcap, which includes companies that are worth below around £500m but are not listed on AIM, has seen the number of companies reduce from 160 in 2018 to just 108 today.
In addition, the market capitalisation of these companies has halved, from £50bn seven years ago to £26bn today.
“The impact on the FTSE Smallcap is much greater than suggested by the data above, as a number of constituents are set to be promoted to the FTSE 250 to replace the companies being acquired,” added Hall.
Meanwhile, AIM has faced a long-documented history of decline, reducing its number of listed companies by 36 per cent in 2018, and the stock exchange’s market capitalisation falling 60 per cent since its peak in 2021.
“The rate of departure has accelerated in the current year, with 44 companies already considering leaving,” Hall noted.
The research head called for a “proper reboot” of the junior market, especially as almost half of the companies set to leave AIM have come from delisting, frequently citing the high cost and volatility of the exchange.
Meanwhile, Hall noted that 70 per cent of the takeover bids this year had been from other firms, compared to just 30 per cent from financial buyers.
“It has been surprising to see relatively low activity from private equity, given the scale of dry powder currently available,” he said.
“We expect this to change as financing conditions improve, meaning that private equity is likely to be a more active acquiror going forwards,”