A third of listed UK small and mid-caps are under threat of a private equity or foreign takeover a new report from a leading broker in the field has claimed.
London’s small cap sector has already seen a record 88 takeovers this year, but this trend is set to accelerate in 2025 says Peel Hunt with the reduction in tax relief on AIM to add to the exodus.
Michael Nicholson, head of advisory & M&A at Peel Hunt Ltd (AIM:PEEL), penned the report and said: “We observe a wave of demand approaching the shores of the UK – with strategic and private equity buyers simultaneously active – and our coastal defences feel weaker than ever.”
“Approaches to UK=listed companies are now coming at an increased rate with those that become public knowledge far outweighed by those that are yet to (or may never) see the light of day.
“We see this trend only accelerating in the new year, absent an unexpected change in circumstances.
“Over 2024, 1 in 20 of all UK listed companies have been put under offer publicly - the highest level we have observed in recent years.”
Management is becoming proactive in seeking a buyer, adds Nicholson as the process has been made easier by changes to Takeover Panel rules.
“For smaller companies, low share liquidity, a share price that barely responds to positive news and a perceived structural dislocation of the share price from fundamental value all call into question the merits of being listed.
“The exodus of capital from UK equity funds and the reduction of tax incentives to invest in AIM only serve to whip up the headwinds facing the UK small and mid-cap segment.”