Key Takeaways
- Foreign takeovers of UK companies surged in the first half of 2025, marking the biggest half-year for overseas acquisitions, driven by "cheap" valuations and improved borrowing conditions.
- Inward M&A deals in Q1 2025 alone exceeded £19 billion, nearly quadrupling the value seen in the previous quarter, with significant transactions like the £5.8 billion buyout of DS Smith (SMDS) by International Paper (IP).
- UK stocks, particularly the FTSE 250, are trading at "uncharacteristically low" price-to-earnings ratios, making them attractive targets for US buyers and private equity firms seeking value.
Foreign buyers are aggressively acquiring UK companies, capitalizing on what many perceive as undervalued assets and robust market fundamentals. The first half of 2025 has witnessed a significant surge in overseas takeovers of British firms, marking the busiest period for such dealmaking. This trend is fueled by a combination of attractive valuations and more favorable borrowing market conditions.
Official data from the Office for National Statistics (ONS) shows that inward merger and acquisition (M&A) deals in the first three months of 2025 surpassed £19 billion, a nearly fourfold increase from the last quarter of 2024. This pushed deal values to their highest levels since late 2022, indicating a strong resurgence in cross-border M&A activity.
A key driver behind this acquisition spree is the perceived undervaluation of UK companies. Investment analysts highlight that UK stocks are considered "cheap and undervalued," with the FTSE All-Share trading at significantly lower price-to-earnings ratios compared to historical averages. For instance, the FTSE 250 was trading at approximately 11x its 12-month forward price-to-earnings ratio in 2024, a notable drop from around 15.5x in January 2022. This ongoing undervaluation makes UK-listed companies highly appealing to bargain-hunting foreign firms and private equity funds.
Private equity firms and strategic corporate bidders, especially from the United States, are leading the charge in seeking out UK targets. Overseas bidders accounted for 47% of all acquisition bids for London Stock Exchange companies valued over £100 million since the start of 2025, totaling nearly £9 billion.
Recent high-profile deals underscore this trend. The £5.8 billion buyout of packaging company DS Smith (SMDS) by US firm International Paper (IP) and Carlsberg's £3.3 billion takeover of drinks group Britvic (BVIC) were among the largest transactions boosting M&A in the first quarter of the year. Other notable acquisitions include Canadian consultancy giant WSP's £281 million acquisition of engineering firm Ricardo (RCDO), and Thoma Bravo's take-private deal for cybersecurity company Darktrace (DARK) at approximately $5.3 billion.
While the volume of deals may have seen some quarterly fluctuations, the underlying fundamentals of the UK market remain strong, with experts anticipating continued activity as dealmakers gain clearer insights into the macroeconomic landscape. The relative stability of the UK market, coupled with improved borrowing conditions, is expected to sustain foreign interest in British assets.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.