Despite being bought for £20mn last year after collapsing into administration, online fashion retailer Missguided is reportedly in talks with Chinese fast-fashion company Shein. While foreign companies continue to target British brands, EY’s latest CEO Outlook Pulse reveals that 98% of UK CEOs are actively pursuing a strategic transition over the next year, with 63% planning M&A activity. In light of this, Claire Trachet, CEO of business advisory, Trachet, and M&A expert, highlights the need for UK to businesses prepare for M&A deals amidst rising foreign acquisitions.

Following the M&A market experiencing a significant decline – reaching its lowest level since 2016 – foreign acquisitions have been a sign of optimism for restoring the market. This was seen last quarter when Swedish PE firm EQT purchased Dechra for £4.5bn in the UK’s biggest takeover of the year, as well as UK online retailer, ASOS being approached by Turkish online retailer, Trendyol, with a £1bn deal. Trachet notes that while it is pleasing to see foreign companies and firms show an interest in UK-based companies, it is crucial that UK founders and firms begin preparing to act on deals, otherwise they risk losing out to foreign competitors.

However, with the majority of M&A activity in 2022 being propelled by foreign buyers, this has caused concern amongst British investors and reinforces concerns about UK companies choosing to list away from the UK. This comes as Arm Holdings opted to list in the US, serving as a serious blow to the UK with shares reportedly soaring 25% over IPO price. Further to this, Irish paper and packaging company, Smurfit Kappa is also in advanced negotiations to merge with US-based WestRock, with plans to relocate its primary listings to the US and maintain a standard listing in London with its newly formed entity, Smurfit Westrock.

Trachet explains while companies will be naturally inclined to list in the US due to the wealth of opportunities the country provides, UK companies also have a responsibility to maintain listings in the UK, as opting to remain in their home country could help increase investor outlook.

Claire Trachet (CEO/Founder) urges UK firms to get ‘deal ready’ now as the number of foreign takeovers continues to rise:

“While the M&A sector has experienced a slowdown this year, these recent international takeovers offer a more optimistic outlook for the UK. The deals occurring reflect how attractive the country is as an investment destination, whilst also providing significant benefits for the economy in a time of need.

“In addition to this, investors are no longer frozen as they know opportunities are presenting themselves and are ready to actively seize them. They also know that a lot of investment opportunities will come from growing industries like the AI and cybersecurity sectors which are on the rise, as well as struggling companies that will be eagerly looking to exit.

“In this sense, acquirers know they will be getting a bargain from low valuations, potentially leading to a flurry of M&A deals, presenting a more positive outlook for M&A activity in the UK. However, this poses an issue for companies getting less than they bargained for.

“With this in mind, businesses should enlist the advice of an expert to help them work through these stages, particularly at an early stage when an expert will be able to identify and resolve any issues that could potentially arise in the future. The simple message here is to prepare early, and bring in the right people to help you conduct ‘pre-due diligence’, which is especially crucial now at a timewhen foreign competitors are targeting British companies.

“For businesses, the next 6-12 months will be a key period for founders to examine whether an M&A deal is the best outcome to carry forward their organisational growth. There needs to be a look at what the priorities of the company are, and then a conversation between the board and investors about this.”