UK companies face new wave of takeovers, warns Numis

The boss of British broker Numis has warned that UK companies face a further wave of takeovers from overseas rivals and private equity groups exploiting “the double benefit of weakened sterling and lowly valued equity markets”.

The UK-listed corporate adviser said its revenue this year would be about 33 per cent lower than last year given the steep fall in equity issuance by companies since the start of the war in Ukraine.

Initial public offerings in the UK market have dried up after investment sentiment plunged following a series of economic shocks.

As a result, Numis said its investment banking revenues were expected to be about 39 per cent lower than in 2021 when the IPO pipeline had been particularly strong.

Ross Mitchinson, co-chief executive, said British institutional investors were not supporting new equity issuance given their own problems with outflows across UK-focused funds.

He added that “overseas investors have been as underweight to the UK as they have ever been”.

“We are not expecting the IPO market to reopen any time soon but history tells us that there can be a strong bounceback when it does.”

Numis said both public and private markets had suffered a significant reduction in deal volumes for equity issuance, but this was partially offset by record advisory revenue as UK corporate targets remained attractive.

The broker is acting as financial adviser on nine announced public bids with an average transaction value of more than £1.5bn, including takeover offers for Aveva and Biffa.

Mitchinson said good British businesses were being targeted opportunistically. “M&A is being driven by UK companies being bid for by overseas companies getting the double benefit of weakened sterling and lowly valued equity markets.”

Private equity funds were looking to buy British companies, but using more equity in deals to cover the lack of debt available at present, he added.

“They can refinance these deals with debt when the market reopens. Sadly, the UK is having more companies leave the market than join.”

The Financial Times reported on Thursday that companies worth more than £41bn had been taken off the UK stock market so far this year as a result of mergers and acquisitions, while just £574mn had been added through IPOs. The domestically focused FTSE 250 is down almost 29 per cent in the year to date.

Numis said revenue for the full year was expected to be about £144mn, a decline of 33 per cent compared with a record period last year. Following regulatory approval, the company has opened a Dublin office to work with its EU-based clients this summer.

Equities revenues will be above £50mn, it said, but about 17 per cent lower than the previous record year.

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