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Our latest Market Tracker trend report looks at the current trends in UK public mergers and acquisitions, including in-depth analysis of the UK public M&A transactions announced in 2021 and insight into public M&A trends and what we and our contributors expect to see in 2022 and beyond.

The report reviews the 53 firm offers, 52 possible offers and five formal sale processes and/or strategic reviews, which were announced by Main Market and AIM companies subject to the Takeover Code in 2021.

Topics covered include:

• outlook for 2022
• deal value and volume
• deal structure
• hostile, competing and mandatory offers
• P2P transactions
• UK and overseas bidder activity
• industry focus
• engagement by shareholders and other stakeholders
• legal and regulatory developments

The report also includes analysis of the year’s high-profile transactions, including the £7.1bn competing offers for Wm Morrison Supermarkets, the £3.5bn consortium offer for Signature Aviation and the £2.7bn offer for DMGT by the Rothermere family.

Report highlights

Significant increase in deal value and deal volume: Public M&A activity increased significantly in 2021 with 53 firm offers announced (2020: 42 firm offers) with an aggregate deal value of £65.2bn (2020: £35.2bn). There were 20 transactions where the offer price exceeded £1bn, with the largest transaction being CD&R’s £7.2bn bid for Morrisons.

P2P activity remained strong: 2021 saw 34 (64%) of the 53 firm offers announced during the year made by bidcos backed by private equity, financial investors and/or individuals/family offices. Private equity’s appetite to engage on larger transactions continued to grow with P2P transactions in 2021 having an aggregate deal value of £41.1bn (2020: £20.5bn) and average deal value of £1.2bn (2020: £733m). This represented 63% of total deal value in 2021 (2020: 58%). Four P2P transactions saw bidders offer cash with unlisted share alternatives. One of these transactions (DBAY Advisors’ offer for Telit Communications) attracted criticism from shareholders who argued that this form of consideration was unable to be held by most independent minority shareholders.

Increased involvement of individuals/family offices: Several of the P2P transactions announced in 2021 involved bidders backed by individuals/family offices, including Bill Gates on the £3.5bn consortium offer for Signature Aviation, the Rothermere family on the £2.7bn offer for Daily Mail and General Trust (DMGT), and Radovan Vitek on the £1.4bn offer for Globalworth Real Estate Investments.

Consortium bids doubled in 2021 from the previous year: There were ten consortium bids in 2021 (2020: five consortium bids), five of which had deal values exceeding £1bn. The composition of consortia was diverse and included private equity firms, pension funds, sovereign wealth funds, corporates, individuals and family offices.

Overseas (particularly US) bidders were active in 2021: overseas bidders were involved in 37 (70%) of the 53 firm offers announced during the period (2020: 62%). Overseas bidders were particularly active on the largest transactions, being involved in 19 (95%) of the 20 £1bn plus transactions announced in 2021. Aggregate deal value of all firm offers involving overseas bidders was £60.1bn (2020: £29.8bn), which represented 92% of the aggregate deal value in 2021 (2019: 85%).

Real Estate and Technology, Media and Telecoms most active sectors: Public M&A activity was spread across a range of industry sectors in 2021 with the most active sectors being Real Estate & Real Estate Investment (15%), Technology, Media & Telecommunications (TMT) (15%), Financial Services (11%), Healthcare & Pharmaceuticals (11%) and Retail & Wholesale Trade (11%). These five sectors accounted for 64% of deal volume in 2021.

Notable increase in the number of hostile takeovers and competing bids: Three offers in 2021 were hostile from the outset and a further three becoming hostile after a higher competing offer emerged. By contrast in 2020 there was only one hostile offer announced during the period. There was also an increase in the number of competing bids with four companies the subject of actual competing offers. 2021 saw the establishment of three auction processes by the Panel to resolve the competitive situation.

Shareholders becoming increasingly vocal: 2021 saw increased shareholder opposition to bids where they felt that the offer undervalued the target company. This engagement took several different forms, including questioning the offer price, challenging schemes in the courts and engaging in bumpitrage to improve offer terms. Pension scheme trustees also expressed concerns on the Morrisons and DMGT bids and sought safeguards from the offer parties. Tobacco company Philip Morris’s takeover of Vectura was in the media spotlight with a number of anti-smoking and healthcare groups opposing the transaction.

The report also considers a number of legal and regulatory developments that took place in H2 2021 (our H1 2021 trend report having considered developments that took place in the first half of the year). These include:

• the Takeover Panel (Panel)’s statement of its intention not to amend the Code to address the increased number of shadow bids
• the Panel’s December 2021 consultation on proposed amendments to the Code
• the coming into force of the National Security and Investment Act 2021
• regulatory investigations and interventions into the Illumina/GRAIL, NVIDIA/Arm, JD Sports/Footasylum and Facebook/Giphy transactions

Market commentary

The report contains expert commentary from:

Giles Distin and Simon Wood, Addleshaw Goddard

Simon Allport, Bird & Bird

James Bole, Steven Fox, David Pudge and Jenny Storey, Clifford Chance

Selina Sagayam, Gibson Dunn

Nicola Evans, Maegen Morrison, Patrick Sarch and Daniel Simons, Hogan Lovells

Leon Ferera, Jones DayIain Fenn and Nicole Kar, Linklaters

Adam Cain, Pinsent Masons

Tom Matthews, Dominic Ross and Allan Taylor, White & Case