Takeovers outnumber IPOs three to one on London Stock Exchange
There have only been four IPOs on the London Stock Exchange so far this year, compared to 15 takeover bids, leading analysts to worry that London’s equity markets are being rapidly depleted of strong companies.
“It’s now been nine months since the UK general election and the pace of IPOs is nothing more than a dribble,” said AJ Bell investment analyst Dan Coatsworth.
Of the four companies to IPO on the stock exchange, three have joined the LSE’s junior market AIM, with only Achilles Investment Company floating on the main market with a £54m valuation.
Rising taxes and disruption from US President Donald Trump’s tariff regime is causing “considerable uncertainty” for firms, Coatsworth said, causing companies to hold off on pursuing IPOs in fear of choppy market conditions.
Yesterday, Peel Hunt head of research Charles Hall stressed that London’s equity markets required “urgent” support to boost attractiveness for IPOs.
However, there have started to be some green shoots of recovery, with authentication tech firm Quantum Base and accountancy firm MHA both announcing in March that they would be pursuing an IPO later this year.
Meanwhile, the biggest takeover approaches so far this year have included Assura’s £1.6bn bid from KKR, Greencore’s £1.2bn agreement for Bakkavor and Dowlais’ £1.1bn proposal from American Axle & Manufacturing.
Most have come at a significant premium to the company’s market capitalisation, suggesting that UK equity markets continue to be undervalued.
“The second quarter has already got off to a strong start with Qualcomm expressing interest in potentially buying Alphawave IP,” noted Coatsworth.
Potential IPOs and takeovers
Despite poor performance so far this year for IPOs, Coatsworth noted that the “rumour mill of new entrants is going into overdrive”.
Some of the names rumoured for a London float in upcoming months include Waterstones, gold miner NMMC, and banking group Shawbrook – which was taken off public markets in 2017.
“There’s also chatter that CK Hutchison might float its European, Hong Kong and South-East Asian telecoms operations in London,” Coatsworth added.
The analyst also noted that in addition to the 15 ongoing takeover situations, there were many targets for bidders still on the market.
These included B&M, which has seen its share price halve over the last year, currently trading on 7.6 times its forward earnings.
“It’s either a bargain at that price or the market doesn’t believe the earnings forecasts,” said Coatsworth.
Halfords is another retailer that many are expecting to be a target, due to its low valuation and need to make radical changes to its business model.
Finally, Jet2’s share price is currently at its lowest level since 2023, with the potential for rival airlines to mount a takeover attempt.
“The holidays company-to-airline operator has a strong market position and a tip-top reputation for good customer service,” said Coatsworth. “It just faces near-term turbulence from cost inflation crimping profit margins and an overly cautious consumer reining in their spending.”