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The latest publication in the Market Tracker Public M&A trend report series provides in-depth analysis of the 27 firm offers, 31 possible offers and ten formal sale processes and/or strategic reviews which were announced by Main Market and AIM companies subject to the Takeover Code (the Code) in H1 2022. It includes insight into public M&A trends and what we and our contributors expect to see in H2 2022 and beyond.

Topics covered:

• outlook for H2 2022
• deal value and volume
• deal structure
• hostile, competing and mandatory offers
• P2P transactions
• UK and overseas bidder activity
• industry
• shareholder engagement
• legal and regulatory developments

The report also reviews the high profile transactions announced in the first half of 2022, including the competing offers for M&C Saatchi by AdvancedAdvT and Next Fifteen Communications Group, and the competing offers for Stagecoach by National Express and DWS Infrastructure.

Report highlights

Deal volumes remain steady, while aggregate deal values decline: Deal volumes were at similar levels to those seen in 2021 with 27 firm offers announced in H1 2022 (H1 2021: 22 firm offers; H2 2021: 31 firm offers). However, after seeing large numbers of high value deals announced in H2 2021, there was a marked decline in deal values with aggregate deal value of £19.1bn in H1 2022 (H1 2021: £17.9bn; H2 2021: £47.3bn) and average deal value of £709m (H1 2021: £811m; H2 2021: £1.5bn). Seven transactions had a deal value over £1bn and the largest transaction was the £4.1bn offer for Homeserve by Brookfield Infrastructure Funds.

Lower levels of P2P activity: Public to private takeover activity was more subdued compared with recent review periods, with ten (37%) of the 27 firm offers involving private equity, family offices or individuals (H1 2021: 73%; H2 2021: 65%). Aggregate deal value of P2P transactions was £9.6bn (H1 2021: £12.9bn; H2 2021: £31.1bn) and average deal value was £964m (H1 2021: £807m; H2 2021: £1.6bn). However, private capital continued to play an important role on the largest transactions with three (43%) of the seven £1bn plus takeovers announced in H1 2022 being P2P transactions.

Recently-listed target companies: Eleven (46%) of the 24 target companies in H1 2022 were admitted to trading on the London Stock Exchange within the last ten years, with four companies (Altus Strategies, CIP Merchant, ContourGlobal and SDX Energy) being admitted to trading in the last five years. On the bidder side, two offerors (AdvancedAdvT and Wheels Up) were special purpose acquisition companies (SPACs), both of which listed in the last 18 months.

US bidders less active: Overseas bidders represented 69% of aggregate deal value for all firm offers during H1 2022. US bidders were less active than in recent review periods, being involved in six firm offers with an aggregate deal value of £5.2bn. This represented 27% of aggregate deal value in H1 2022.

Support Services, Real Estate and TMT sectors active: Public M&A activity was spread across a range of sectors in H1 2022 with the most active sectors being Industrial Support Services, Real Estate and Technology, Media and Telecommunications (TMT), which each saw four firm offers and collectively accounted for 44% of all firm offers. The public transport sector was also active with three of the UK’s leading bus and train operators being the subject of firm and/or possible offers.

Increased hostile takeover activity: Three firm offers were announced in H1 2022 that were hostile from the outset and a further two becoming hostile after the target board withdrew its recommendation. Competition for target companies was relatively high with three companies (M&C Saatchi, Stagecoach and Tungsten Corporation) receiving firm offers from rival bidders and a further four companies (Go-Ahead Group, Ideagen, McKay Securities and River and Mercantile Group), that were the subject of firm offers in H1 2022, attracting potential competing offers.

Shareholder engagement: H1 2022 saw fewer examples of shareholders being publicly critical of M&A transactions compared with 2021, but Capital & Counties Properties’ all-share merger with Shaftesbury encountered opposition from Royal London Asset Management and Investec, who questioned whether the merger was in the best interests of Shaftesbury shareholders. However, the deal has the support of Norwegian sovereign wealth fund, Norge Bank, which has a 26% interest in Shaftesbury and a 15% interest in Capco. Tullow Oil’s all-share merger with Capricorn Energy also attracted criticism from shareholders, with Legal & General arguing that there were no ‘material synergies between the two companies, their strategies or their business models’. Hedge fund, Kite Lake Capital, also voiced opposition to the Tullow OIl/Capricorn deal.

The report considers a number of legal and regulatory developments that took place in H2 2022 including:

• the Takeover Panel (Panel)’s consulting on proposed changes to the presumptions contained in the definition of ‘acting in concert’ in the Code
• the Panel publishing a new version of the Code in June 2022
• the Panel publishing a new Practice Statement 33 (which deals with the purchase of offeree shares by an offeror during an offer period) and updating Practice Statement 20 (which deals with the obligation to make an announcement under Rule 2.2)
• the UK government announcing wide-ranging changes to the competition and consumer law regimes, which include significant changes to the UK merger control regime
• the Competition and Markets Authority (CMA) imposing three record fines for breaches of initial enforcement orders in relation to the Facebook (now Meta Platforms)/Giphy and JD Sports/Footasylum acquisitions
• the CMA and the European Commission reaching diverging conclusions on certain parallel merger reviews
• the EU General Court dismissing Canon’s gun-jumping appeal    
• the UK government publishing its first report on the implementation of the National Security and Investment Act 2021 covering the period 4 January 2022 to 31 March 2022

The report contains expert commentary from:

• James Bole, Rui Huo, Katherine Moir and David Pudge, Clifford Chance
• Selina Sagayam, Gibson Dunn
• Tom Brassington, Nicola Evans, Patrick Sarch and Daniel Simons, Hogan Lovells
• Iain Fenn, Nicole Kar and Dan Schuster-Woldan, Linklaters
• Tom Matthews, Dominic Ross and Allan Taylor, White & Case

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