British Takeover Wave Is 70% Over, Top Jefferies Banker Says
(Bloomberg) -- The wave of overseas acquirers snapping up U.K. listed companies is 70% over, according to a top dealmaker at Jefferies Financial Group Inc.
Such deals are becoming less attractive as British stocks’ discount to U.S. peers has narrowed, said Philip Noblet, head of U.K. investment banking at Jefferies.
“There’s more to come, but the market has become more expensive,” Noblet said in an interview last week.
Foreign companies and buyout firms have been scouring the London market for bargains, helping U.K. mergers and acquisitions more than double this year to $511 billion. The acquisition spree has included bids for grocery chain Wm Morrison Supermarkets Plc, aerospace supplier Meggitt Plc and drugmaker Vectura Group Plc.
That valuation gap has shrunk in the past few months. Britain’s mid-cap FTSE 250 Index now trades at 16.3 times next year’s estimated earnings, just shy of the 16.8 times multiple for the S&P Midcap 400 Index of U.S. stocks, according to data compiled by Bloomberg. The U.K. benchmark traded at as much as a 26% discount to the American gauge earlier this year.
The flurry of overseas deals has caused the British government to pronounce it’s looking carefully at proposed mergers, especially in the defense sector. Private equity bidders have also sought to assuage worries by promising to preserve jobs and keep investing in the U.K.
Noblet said he expects more American corporate buyers to pursue deals for British firms, adding to the list of deals done by buyout funds. There are still U.K. companies that are particularly vulnerable, especially in the industrial and services sector, he said.
“We haven’t seen that many trade buyers coming through yet, probably because the home market has been so good,” Noblet said.
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