Private equity had the largest proportion of firm offers, at 51%, a significant increase from 25% in 2022.
Increasing regulatory burden on small listed companies coupled with limited liquidity and relevance for institutional investors has increased consideration of take-private approaches, according to the report.
UK M&A fuelling ‘relentless’ de-equitisation drive
Peel Hunt also noted that smaller deals continued to represent the majority of transactions in 2023, with just a small minority of announced firm offers exceeding £500m equity value.
The overall value of deals has considerably declined in recent years, with the combined equity value of firm offers in 2023 totalling approximately £19bn, compared to £41bn in 2022 and £72bn in 2021.
Shareholder activism and M&A surge is a mixed blessing for investment trust sector
The US market traded at a material premium in 2023 compared to the UK market, which was attributed to relatively low UK average PE multiples, which created an opportunity for “well capitalised strategics or PE with ample dry powder to make UK acquisitions cheaply even with average premia increasing”.
The average premium gradually increased to compensate for “depressed” valuations, with private businesses paying over historical average premiums, with a mean premium of approximately 100% in 2023, according to the report.
US private equity firm becomes controlling shareholder of Titan Wealth
Peel Hunt also argued that the stabilisation of interest rates in 2023 has provided greater certainty on financing costs, which will bring greater confidence into the financing market for 2024.
The outlook for 2024 included continued focus on small- and mid-cap opportunities, financial sponsors taking on a more active role, the return of strategic acquisitions from overseas corporates, continued shareholder activism for valuations and the provision of share alternatives to bridge valuation gaps.
