Henrik Persson, Head of Public M&A Advisory, finnCap Group:
2020 has, so far, and for obvious reasons, not been the buoyant year for public company dealmaking that breathlessly optimistic commentators thought it might be at the start of the year.
The ingredients were all apparently there: market sentiment was decidedly optimistic, major political overhangs on the British economy had been addressed, and leverage was cheaply and easily available. There had been a marked upturn in interest in take-private transactions by the private equity community, not least because of their reportedly record levels of available “dry powder”.
That is however not the whole picture. Transactional activity has sustained, even during the most severe phase of lockdown, with an encouraging level of private equity or financial sponsor activity amongst these transactions.
Public company offers announced in 2020
There have been 19 firm public company offers announced in 2020 to date (source: PLC What’s Market), clearly trending behind 74 in the course of the whole of 2019 (the highest in many years) and an average of roughly 50 per year through the previous decade. The contrast to the so-called Great Financial Crash is perhaps more telling; there were only 23 and 21 firm offers announced respectively during the whole of the 2008 and 2009 years. Eight of 2020’s offers were announced prior to lockdown in mid-March 2020, four during the three month peak lockdown period that followed, and then a relative flurry of seven in the short period since lockdown restrictions began to be eased in mid-June 2020. This illustrates not only that transactions were able to be advanced and that there is a continuing enthusiasm for UK public company takeovers, notwithstanding the practical restrictions imposed in the face of the pandemic and the economic shock that it has wrought. Perhaps the grounds for optimism at the start of the year were not fundamentally misplaced.
The composition of these deals is interesting. It had been a concern that the financial sponsor community would be reluctant to pursue deals until economies and business environment stabilised into a “new normal”, but just over half of 2020 deals were private equity or financial sponsor “take private” transactions. This is also notwithstanding that equity market valuations have remained surprisingly resilient, or at least, recovered further than many expected. The sample size is admittedly small but it does represent a significant increase on the previous decade’s record of a third having been such deals. One might not reasonably have expected “blockbuster” deals in the circumstances, but two of three offers with a value of over £1 billion have been in recent weeks. These statistics do not include 11 announced formal sales processes or strategic reviews, and a small number of possible offers which have deliberately or inadvertently become public. One is drawn, supported also by the anecdotal evidence from conversations with market participants, to the hopeful conclusion that there ingredients remain in place for a buoyant level of dealmaking in the second half of 2020.
Our work in Public M&A Advisory at finnCap
finnCap are delighted to have been involved in six announced situations during 2020 – on the sellside: acting as financial advisers to Castleton on its recommended takeover by MRI, to HML Holdings on its ongoing recommended offer by Harwood Capital; on the buyside: as financial advisers to the Fortune 500 company Motorola Solutions, Inc. on its takeover of the AIM-listed IndigoVision and to PETRA Group on its ongoing recommended offer for HWSI Realisation Fund. We are supporting Best of the Best as Rule 3 adviser as it explores its options. We have acted for Frenkel Topping in response to an approach by Harwood Capital and have significant experience in working with PLC boards behind the scenes to help them in planning their bid defences from actual or feared approaches. We continue to act for companies in response to unwanted shareholder activism, and for shareholders wishing to bear influence on public companies. Since the start of 2018, we have advised on 21 announced public takeover situations, for both our retained corporate clients and for those outside it who recognise a need for our expertise, involving parties based at home or across the globe, on a sole basis or collaborating with other advisers.
We are proud to be a leader in the field and to have been trusted to advise on so many interesting and rewarding situations. We expect the coming months to be busy and look forward to continuing to help our clients to acquire, defend or otherwise achieve their strategic objectives.