Public Company Takeovers in the United Kingdom: A Guide for US Private Equity Acquirers

    View Author August 2012

    For US private equity funds, the present time may represent an exceptional opportunity to consider acquiring UK publicly listed companies.

    In the last six months, non-UK bidders have accounted for three-fifths of all UK takeover bids. Of these bids, the majority (valued in aggregate at almost US$7.4 billion), have come from North America. These include Francisco Partners’ bid for Kewill plc; TPG Capital’s bid for GlobeOp Financial Services; Vista Equity Partners’ bid for Misys plc; Sun Capital Partners’ bid for Jacques Vert plc; and Rami Cassis and others’ (including Dover Street VII Fund, a fund managed by HarbourVest) bid for Parseq plc.

    The US dollar’s strength relative to the pound, the attractiveness of a cash exit to certain shareholders, and the current relatively suppressed level of UK stock market prices are just some of the factors driving what may be a growing trend of US private equity backed takeovers of UK corporations. Here are some additional factors making companies on the UK stock markets an attractive target for US acquirers:

    • The process for effecting a UK takeover is swift, relatively cheap and rarely subject to legal challenge or third party legal claims.
    • The UK government and authorities do not interfere, politically or otherwise, in takeovers and do not actively seek to “protect” UK companies from foreign takeovers.
    • Directors of a target company are prohibited during offers from frustrating a takeover for their company (e.g., through “poison pills”) except with the consent of a target company’s shareholders. Attempting to adopt poison pills at other times is usually frowned upon by significant institutional investors and, therefore, poison pills are extremely rare in relation to UK publicly listed companies.
    • If the purchase price being offered by a buyer is reasonable or attractive, it will usually be target company shareholders – not its management, authorities or employees – who decide whether or not a takeover should succeed.
    • With stock market share prices in the UK currently remaining at relatively suppressed levels, the appetite of certain significant shareholders for a cash exit is favorable.
    • There are a large number of midcap companies below the US$200 million market cap listed on the London markets including 1,200 listed companies below the US$100 million market cap whose relatively smaller size should make funding acquisitions easier.
    • The quality of assets potentially available to purchase through a public company takeover is often high, with UK public companies being subject to stringent disclosure and transparency regulations.
    • Many buyers in the UK and Europe may currently be nervous about their position in the Eurozone and are not making bids – which potentially results in less competition for quality UK companies and their assets.
    • Despite recent changes in UK takeover regulations, the UK remains one of the most open takeover markets in the Western world.

    If you are interested in making a bid for a UK company, Squire Sanders, with its significant network of offices across the US and the UK, has a wealth of experience in both the UK and the US to help you at every step of the process. We would be happy, before any formal instructions, to take you through the process of effecting a UK takeover offer and can also introduce you to investment bankers or other financial advisers in the UK or the US who can assist you on those transactions. Please feel free to take us up on that offer by contacting your principal Squire Sanders lawyer or one of the individuals listed in this publication.

    A public company takeover, in any jurisdiction, is never simple but with our resources, know-how and experience we can provide both practical and legal guidance to maximize success and avoid pitfalls. "Public Company Takeovers in the United Kingdom: A Guide for US Private Equity Acquirers" aims to answer the general questions you may have relating to the takeover of a company that is publicly listed in the UK.