London stock market shrinks at fastest pace in over decade

Takeovers of London-listed companies are shrinking the UK stock market at the fastest pace in more than a decade, Report informs via Bloomberg.

About 45 companies have delisted from the London market this year due to mergers and acquisitions, up 10% from the tally for all of last year, according to data compiled by Bloomberg.

That’s the highest number of firms to leave the market since 2010, and comes as the volume of deals targeting UK companies jumps 81% this year to more than $160 billion.

Foreign private equity firms have been particularly active, with US-based Starwood Capital Group closing its £674 million ($852 million) acquisition of London-listed Balanced Commercial Property Trust Ltd. last month. Sweden’s EQT AB also completed its £2.1 billion takeover of videogame services company Keywords Studios Plc in recent weeks, while Thoma Bravo finished its $5.3 billion purchase of cybersecurity software provider Darktrace Plc.

The moves show how the British stock market remains popular with bargain hunters, with UK equities now trading at a record discount of more than 40% to global peers, according to data compiled by Bloomberg. A number of the targets have been mid-cap firms listed on London’s AIM market, where companies often have thin trading volumes and little analyst coverage.

“Unless the UK gets its act together, it’s going to continue to lose ground and relevance,” said Liad Meidar, managing partner at investment firm Gatemore Capital Management. “Quite simply, companies can’t get the right cost of capital. They can’t get the valuation they want.”

Many of the year’s biggest deals have been cross-border, with Czech billionaire Daniel Kretinsky agreeing to acquire the owner of Royal Mail in a deal valuing the company at roughly £3.6 billion. Meanwhile, Danish brewer Carlsberg A/S is in the process of taking over UK Pepsi bottler Britvic Plc in a £3.3 billion deal.

More transactions are in the pipeline. Aviva Plc Chief Executive Officer Amanda Blanc is trying to convince the board of Direct Line Insurance Group Plc to engage after making a £3.3 billion takeover bid for the UK car insurer. Meanwhile, General Atlantic is working toward an agreement to acquire Learning Technologies Group Plc, an online training business with a market value of £730 million.

All these deals — combined with a dearth of initial public offerings in London — mean that the total number of listed companies in the UK continues to shrink.

Eleven companies have completed London IPOs this year to raise a combined $1 billion, down 11% from the amount raised during the same period in 2023, according to data compiled by Bloomberg. At the same time, firms including Just Eat Takeaway.com NV and Flutter Entertainment Plc are either dropping their London listings or shifting their primary listings overseas.

A representative for bourse operator London Stock Exchange Group Plc said that IPOs aren’t the sole indicator of the health of the UK capital markets, with the broader volume of primary stock offerings well ahead of other European exchanges.