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The UK has witnessed a significant surge in mergers and acquisitions (M&A) activity, making it the second most targeted nation globally behind the US.

Data from the London Stock Exchange Group indicates that M&A deals in the UK have reached $76.1 billion (£60.2 billion) thus far in 2024, marking an 88% increase from the previous year.

Despite this substantial increase in deal value, the number of deals has actually decreased by 25%, although it still surpasses one thousand.

In terms of global M&A share, the UK has accounted for seven percent this year, compared to four percent the previous year, solidifying its position as a prominent target for acquisitions.

A significant portion of these deals (45%) involve overseas acquirers, with notable examples such as the targeting of DS Smith by International Paper and Mondi.

The materials sector has emerged as the most targeted sector in the UK, driven by major deals including the recent takeover offer for DS Smith and Mondi’s bid.

Additionally, real estate and financial sectors have experienced boosts, with examples like the mega-merger of LXi REIT and Londonmetric, as well as Nationwide’s plan to acquire Virgin Money.

Private equity firms have also seen an uptick in deals, with a total value of $4.6 billion (£3.6 billion) recorded in 2024, marking a 39% increase from the previous year. However, UK outbound M&A activity has experienced a decline of 14% year-to-date, reaching a five-year low of $14.3 billion (£11.3 billion).

Lucille Jones, senior manager at London Stock Exchange Group Deals Intelligence, attributes this surge in M&A activity to a period of relative stability characterised by easing inflationary pressures and stabilised interest rates.

Jones notes that CEOs and boards are capitalising on this period of calm ahead of the general election to execute strategic moves, indicating improved confidence in the market.

While the relatively attractive valuations of UK Companies, as result of the lower price to earnings ratio of many UK companies listed on the LSE vis a’ vis their peers in some other developed financial markets, is also seen as significant motive for increased M&A activity.

(Source: City AM)

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