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This Market Tracker trend report includes in-depth analysis of the UK public M&A transactions announced in H1 2021 and provides insight into what we and our contributors expect to see in H2 2021 and beyond.

What does the Market Tracker trend report cover?

The Market Tracker trend report provides in-depth analysis of the 22 firm offers, 24 possible offers and two formal sale processes and/or strategic reviews, which were announced by Main Market and AIM companies subject to the Takeover Code (Code) in H1 2021. It includes insight into public M&A trends and what we and our contributors expect to see in H2 2021 and beyond.

Topics covered include:

• outlook for H2 2021
• deal value and volume
• deal structure
• hostile, competing and mandatory offers
• P2P transactions
• UK and international bidder activity
• industry focus
• post-offer statements of intention (POI statements) and coronavirus (COVID-19)
• shareholder engagement on takeovers
• legal and regulatory developments

The report includes analysis of high profile transactions, including the £3.5bn offer for Signature Aviation by a consortium comprising Blackstone, Global Infrastructure Partners and Bill Gates’s, Cascade Investments, and shareholder engagement on the Morrisons, St Modwen Properties and William Hill takeovers.

What are the highlights from the report?

After a very strong Q4 2020, takeover activity returned to more moderate levels in 2021 with 22 firm offers announced in H1 2021. This represented a 27% drop in deal volume compared with H2 2020 (30 firm offers), but an 83% increase compared with H1 2020 (12 firm offers).

Aggregate deal value was £17.9bn and average deal value was £811m. This compares with aggregate deal values of £2.6bn and £33.4bn and average deal values of £220m and £1.1bn in H1 2020 and H2 2020 respectively. Six transactions had a deal value over £1bn, the largest of which was the £3.5bn consortium offer for Signature Aviation.

Public to private transactions remained active, with 16 (73%) of the 22 firm offers involving private equity, family offices or individuals (H1 2020: 67%; H2 2020: 67%). Aggregate deal value of P2P transactions was £12.9bn (H1 2020: £2bn; H2 2020: £19.2bn) and average deal value was £807m (H1 2020: £253m; H2 2020: £961m). Four of the P2P transactions were consortium offers and four involved individuals or family offices.

Overseas bidders were involved on 15 (68%) of the 22 firm offers announced in H1 2021 with an aggregate deal value of £16.6bn, which represented 93% of aggregate deal value during H1 2021. US bidders were particularly active, being involved on 12 transactions with an aggregate deal value of £14.1bn. This represented 79% of aggregate deal value in H1 2021.

Healthcare was the most active sector which saw four (18%) firm offers announced in H1 2021. Financial Services, Investment and Real Estate were also active with three (14%) firm offers announced in each of these sectors during H1 2021.

The economic uncertainty arising from the coronavirus pandemic caused a number of bidders that had made POI statements in H1 2020 to publish divergence statements in H1 2021. The action most frequently taken by companies that were departing from their POI statements related to the furloughing of employees and/or reduction in headcount, but office closures, reduced marketing spend and other restructuring measures also featured in divergence statements.

H1 2021 saw shareholders becoming increasingly vocal in their opposition to bids where they felt that the offer undervalued the target company and there has been an ongoing dialogue in the media concerning private equity acquiring UK listed companies on the cheap. On Caesars Entertainment’s takeover of William Hill, investors unsuccessfully sought to persuade the court not to sanction the scheme on the grounds that key information had been omitted in the scheme document. Shareholders also voiced opposition to the takeovers of Globalworth Real Estate Investments, St Modwen Properties and Telit Communications, on the grounds that the offers materially undervalued the target businesses.

The report considers a number of legal and regulatory developments that took place in H1 2021, including:

• the Takeover Panel’s amendments to the Code
• the High Court clarifying how shares held by certain nominee shareholders, including holders of American Depositary Receipts, should be treated for the purpose of the headcount test on a scheme of arrangement
• the National Security and Investment Act 2021 being enacted
• publication of new guidance by the European Commission on Article 22 EU Merger Regulation referrals for transactions falling below national thresholds
• publication of new EU foreign and direct investment (FDI) proposals to address the potential distortive effects of foreign subsidies in the single market
• the Competition Appeal Tribunal judgment upholding the Competition and Markets Authority (CMA)’s decision concerning its finding of jurisdiction in Sabre/Farelogix
• the major review exercise undertaken by the CMA of its merger guidelines in order to reflect developments in its approach to merger control and Brexit

Market commentary

The report contains expert commentary from:

• Giles Distin and Simon Wood, Addleshaw Goddard
• Simon Allport, Bird & Bird
• Kate Cooper, Freshfields Bruckhaus Deringer
• Selina Sagayam, Gibson Dunn
• Tom Brassington, John Connell, John Holme and Patrick Sarch, Hogan Lovells
• Iain Fenn, Nicole Kar and Dan Schuster-Woldan, Linklaters
• Adam Cain and Sunjay Malhotra, Pinsent Masons
• Tom Matthews, Dominic Ross and Allan Taylor, White & Case