UK equities have traded at a steep discount to global peers for several years, but in 2024, a surge in mergers and acquisitions (M&A) signalled renewed interest in UK businesses.
This wasn’t just a handful of opportunistic deals - around 10% of the FTSE 250 was taken over in 2024, the highest level in 18 years. Large caps also saw rare takeover activity, while small caps experienced a wave of interest, with buyers snapping up undervalued companies.
As buyers continue to capitalise on discounted UK valuations, both domestic and international investors may view rising M&A as a sign of confidence. This could help draw more capital back into the UK market in 2025, potentially narrowing the valuation gap.
UK mid-caps were at the centre of 2024’s M&A wave, with 75% of total deal value focused on the FTSE 250.
One of the most striking trends was the shift from financial buyers (such as private equity) to corporate acquirers, which accounted for two-thirds of deals last year. This suggests that businesses see long-term strategic value in UK-listed companies, not just short-term gains.
Overseas buyers were also a major force, with around 55% of transactions driven by international firms taking advantage of the weaker pound. With valuations still low by historical standards, this momentum looks set to continue in 2025.
You don’t need to look very far to be confronted with negative headlines and stories of broken Britain. But, maybe it’s time to change the narrative, take a closer look and discover the real story on UK equities.
M&A activity in the FTSE 100 is typically rare, but 2024 saw the start of a potentially notable shift. Five blue-chip companies received bids—compared to none in 2023.
This wave of interest isn’t just about valuation discounts. It underscores the strength of UK management teams and the long-term growth prospects of these businesses. The fact that major corporations are attracting bids highlights the enduring appeal of UK equities.
With interest rates expected to decline further in 2025, financing conditions could become even more favourable for large-scale acquisitions, keeping the momentum going.
M&A activity in UK small caps was a key theme in 2024 and looks set to continue in 2025. This sustained interest reinforces the view that valuations remain low both historically and relative to global peers.
The trend is particularly evident in the AIM market, home to many smaller, high-growth companies. In 2024, one-third of AIM-listed firms saw their value drop by over 30%, making them prime takeover targets. While these deals may offer short-term gains, they also raise concerns about long-term value creation. Many businesses are being acquired before reaching their full potential.
With parts of the UK market still trading at a discount, investors are becoming more proactive in ensuring companies aren’t sold too cheaply. Ongoing stewardship remains key - we actively engage with boards to ensure shareholders receive fair value in takeover bids.
At the same time, companies are also taking steps to protect themselves. A record number of share buybacks in 2024 suggests that management teams recognise the undervaluation and are acting to defend their businesses from opportunistic takeovers.
The surge in M&A activity highlights both the attractiveness and undervaluation of UK equities. As corporate and private equity buyers continue to invest in UK equities for the long term, this could help shift broader market sentiment.
If investors view M&A as a vote of confidence, it could be the catalyst that finally helps close the UK’s valuation gap - unlocking opportunities in 2025 and beyond.
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