The current M&A situation in the UK and leaks in informations

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PROLIFERATION OF M&A ACTIVITIES IN THE UK

• M&A activity in the UK is up 50% from last year and current conditions are favourable to more.

• In Q1 2025 (Jan-Mar), the values of M&A were at their highest since late 2022.

• It is mainly driven by large, high value deals instead of a great number of them

  
  

  DOMESTIC M&A & INWARD OUTWARD M&A

• Domestic M&A, however, dropped by £3.5bn than in Q4 2024.

• It is mainly driven by an increase in value of inward and outward M&A

• Inward = foreign companies acquiring UK companies

• Outward = UK companies acquiring foreign companies

  
  

A LEAKY MARKET?

• Almost 40% of public company acquisitions were reported in the media before they were announced by the parties involved.

• The Financial Conduct Authority (FCA) is concerned about the potential consequences.

• Shell was forced to deny that it was in early-stage talks about a takeover of BP, due to a leak in the media.

• FCA found that 42 out of 110 announcements of M&A were pre-empted by media speculation.

• However, not all leaks are done so unbeknownst to the parties in the deal:

  • Strategic leaks by companies allow them more power to negotiate by:

  • Attracting attention from bidders or eliminate unwanted potential acquirers by making their interest public prematurely

  • A leak has added £42mn to the cost of an acquisition due to a ‘strategic leak’.

• 38% of UK corporate takeovers had an increase in price two days before the deal was announced.

• Leaks in an M&A deal might violate the Takeover Code, created by the Takeover Panel.

• The Takeover Panel is an independent body whose main functions are to issue and administer the Takeover Code and to supervise and regulate takeovers.

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POLITICAL

Leaks in the market might create pressure and lead to government or regulatory bodies (UK Takeover Panel, FCA) tightening the oversight of M&A activity.

ECONOMICAL

The ultimate price of a takeover can increase due to leaks, as mentioned. That might lead to an increased cost of deals, inflating the general price of companies across the economy.

Higher cost might lead to less resources allocated to improving the acquired company, therefore leading to less value obtained by purchasing the company due to low profit. This impact might be exacerbated in the case of Private Equity firms as they normally acquire a company through debt (leverage buyout), and they might have to borrow more, making their endeavour more risky. Further, less returns might be distributed to the investors of a Private Equity firm as the acquired company is worth less when sold (due to inadequate investment).

Leaks can also drive up target company prices, distorting and amplifying the true values of it.

SOCIAL

Leaked deals can cause anxiety and uncertainty among employees in both the bidder and the target company.

TECHNOLOGICAL

There is a certain degree of cybersecurity risk when leaking sensitive information in a deal. Potential customer details might be leaked, leading to an infringement of customer privacy.

LEGAL

As mentioned, an infringement of customer privacy can lead to potential legal action taken against the company, leading to fines or imprisonment.

Leaking information can trigger potential investigations under laws like the UK’s Market Abuse Regulation. Specifically under the market abuse offences and disclosures provision.

ENVIRONMENTAL

Fortunately, leaking information has no direct environmental effect.