London market faces renewed foreign takeover wave as UK listings thin

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Highlights

Swiss group ABB agreed to acquire UK-listed Rotork for £4.1 billion, while Gooch & Housego accepted a £345.6 million offer from Arlington Capital Partners.
Value of bids for London-listed companies is surpassing new entrants by 27 to 1 in 2024, deepening concerns over the London Stock Exchange's shrinking depth.
Major shareholders such as Fidelity International and Aviva Investors opposed DCC's sweetened takeover approach, reflecting continued foreign interest amid thin UK listings.

Thursday deals highlight pressure on London valuations

As reported by Financial Times, three separate situations on Thursday underscored how overseas buyers are targeting UK-listed companies while London struggles to retain quoted businesses.

Swiss engineering group ABB agreed to buy UK rival Rotork in a 4.1 billion pound all-cash deal, saying the acquisition would strengthen its automation division. On the same day, FTSE 100 energy group DCC disclosed a sweetened takeover approach from KKR and Energy Capital Partners, although major shareholders including Fidelity International, Aviva Investors and Marathon Asset Management have already opposed the bid.

Also on Thursday, London-listed photonics engineering group Gooch & Housego agreed to a 345.6 million pound cash takeover by U.S. private equity firm Arlington Capital Partners. The latest activity follows other recent examples cited in the market, including interest in easyJet from Castlelake and Apollo and foreign investors taking stakes in UK telecoms companies.

Listing drought deepens concern over market shrinkage

Bankers and advisers may welcome the pickup in dealmaking, and some in the City argue that London’s openness to international capital remains a core strength. JPMorgan and Rothschild are among the firms advising on multiple transactions tied to Thursday’s announcements.

Even so, there are few signs that new flotations are replacing companies leaving the market. The value of bids for London-listed companies is outstripping the value of new entrants by 27 to 1 this year, reinforcing fears that the London Stock Exchange is losing depth after years of decline since the financial crisis.

The weak pipeline is renewing pressure on policymakers as the UK government tries to revive the exchange, including through a stamp duty holiday for new listings. Downing Street has also asked major private equity firms why they are not bringing British portfolio companies to the London market.

We previously reported on a wave of overseas acquisitions of London-listed companies that is far outpacing new stock market listings, reinforcing concerns that UK valuations are too low and confidence in the domestic market remains fragile. That piece highlighted how the growing imbalance is feeding fears of a shrinking London market and argued that clearer policymaking and reforms are needed to help reverse the outflow and rebuild listing momentum.

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