• Emerging economies responsible for 15% of all acquisitions
  • Foreign buyers pick off technology companies

Just one third of all UK listed companies taken over during Q4 2010 were bought by British companies, reveals new research from Wedlake Bell LLP, the City law firm.

The proportion of overseas bids for UK listed companies* reached a peak in the final quarter of 2010, with 65% of completed bids coming from overseas.

Overseas takeovers of UK listed companies are now thought to be at their highest ever level with 54% of the 113 takeovers during 2010 coming from overseas buyers, compared with just 40% in 2009 and 44% in 2008. (See chart below)

Percentage of M&A deals targeting UK listed companies completed by overseas bidders

Click here to view the graph.

According to Wedlake Bell, the USA remains the number one overseas bidder for UK listed companies, responsible for 22% of all takeovers in 2010.

However, the research also reveals that emerging economies are increasingly active in the UK markets, with companies from emerging markets acquiring 17 UK listed companies during 2010 - 15% of all deals. This was up from 10% of all deals in 2008. By contrast, Western European companies made only 7% of acquisitions in the UK market during 2010.

Canadian companies are now increasingly active in the UK markets, and were the aggressors in 8% of all listed company takeovers during 2010, up from 5% the previous year. Canada's TMX exchange and the London Stock Exchange are currently conducting a merger which is intended to create a new centre of excellence in mining, energy and clean technology listings.

Tim Bird, Partner and Head of the Corporate Team at Wedlake Bell, comments: "It is an endorsement of the health of our public markets that so many overseas companies are interested in investing in London-listed companies."

"However, we should be concerned that British firms do not have the firepower to be the hunter rather than the hunted as it suggests that UK companies are still relatively weak coming out of the financial crisis and the recession."

"By contrast, Canada, along with many of the resource-rich emerging economies is particularly aggressive at the moment. They are capitalising on the stability of their mineral wealth to diversify from their traditional stronghold to build strength in other sectors such as financial services, technology and hospitality."

"In the future, we might expect the merger between the TMX and the London Stock Exchange to encourage more M&A between Canadian and British firms."

Foreign buyers target technology companies

Of Q4's 19 overseas bid for London listed companies, 31% involved companies from high technology sectors such as IT and clean energy.

Tim Bird adds: "While London is sometimes seen as a natural resources market, it seems that foreign buyers are increasingly coming here to acquire technological expertise whether it is home-grown or from one of the London market's overseas companies."

"This year several promising British technology firms have been picked up by overseas buyers, which is another sign that while British technology companies have got the talent to lead us into a technology based recovery, they lack the investment that would help them to scale up fast enough"