The UK has suffered another blow to its leading IPO status with Tremor International, a leading advertising technology company, currently considering a ditch of its London listing with the possible intention to now list in New York. This follows a recent trend of several large companies ditching or considering ending their London listings, such as US-focused insurance broker Marsh McLennan, cancelling its London listing last week. In Q3 this year, the London Stock Exchange and the Alternative Investment Market have only been able to host five new listings raising just under £360M, with the market having fallen by 36% when compared to the same period in Q3 2022 in which eight issuers raised £565.5m. Furthermore, over the first three quarters of 2023, 23 companies listed in the UK raising £953m, compared with 34 IPOs raising £1.16bn over the same period in 2022.

In light of this, Claire Trachet, industry expert and CEO/Founder of business advisory, Trachet, discusses the growing trend of companies listing in the US, what this means for the UK and how the UK’s IPO and M&A markets can bounce back.

In 2023, there has also been a continuation of UK companies being targeted by foreign takeovers, with the majority of M&A activity in 2023 being propelled by foreign buyers. Similarly to choosing to list abroad, cross-border M&As have also become more attractive as firms feel more optimistic about their deal prospects in countries that are experiencing improved economic conditions, such as the US. In light of this, Trachet argues that the government needs to act now in order to ensure that the UK remains an attractive place for businesses to both exit and list on the LSE.

Highlighting the extent of the current issue in the M&A market specifically, the number of UK M&A deals has fallen to a 14-year low, resulting in a total value of 144.7bn, down 45% year on year – bringing its lowest year-to-date total since 2009. M&As involving a UK target have only reached a value of £77bn, just over half the value recorded during the same period in 2022. This is in conjuncture with a 48% decline in domestic M&A, as well as a 49% drop in inbound deals. With these economically trying conditions facing the UK, it may come as no surprise to see that businesses such as Tremor International are eager to move away from the UK.

Claire Trachet (CEO/Founder) highlights that despite current market conditions, she expects both listings and dealmaking activity to increase in H1 2024:

“In terms of listing, there is often more potential in the US compared to the UK, so when you are a company in Europe, there will always be the question of whether you should list in your home market or go to the US. The reason it’s so much stronger now is because the dollar is strong, I think one of the things we will see in the next five or ten years will be European governments being focused on improving their own currencies to combat this.

“Both global and UK businesses are still looking to list on the LSE, however, until economic conditions strengthen, and investor trust and appetite are restored, the city will continue to experience a largely inactive IPO market.

“I think we will eventually see an increase in UK listings, but this won’t happen until inflation stabilises, lifting the curtain on what remains an uncertain economic outlook. In the meantime, we’ve quickly moved into an environment where companies are seeking funding from private equity vehicles or strengthening their position through M&As.”