- Foreign takeovers of UK companies jumped to £27.4bn in the final quarter.
- Several billion-pound deals involving US buyers drove the spike in activity.
- Analysts say relatively lower valuations continue to draw overseas investors.
Foreign buyers stepped up their hunt for UK companies in the final quarter of last year, pushing the value of inward mergers and acquisitions to levels not seen in four years.
Figures from the Office for National Statistics show that deals in which overseas companies acquired UK firms reached £27.4bn during the quarter. That is nearly £20bn higher than the previous three-month period, marking the strongest quarter for inward M&A activity since the second quarter of 2021.
Much of the increase came from a handful of large transactions valued above £1bn. Several well-known UK companies changed hands during the period, continuing a pattern that has seen international buyers take advantage of relatively lower valuations in Britain.
One of the most widely discussed deals came in October when food delivery company Deliveroo was formally acquired by its US rival DoorDash for £2.9bn. The takeover highlighted the different fortunes of tech companies listed in the UK compared with those in the US.
Deliveroo floated on the stock market in 2021 with a valuation of £7.6bn but struggled to sustain investor confidence after listing, with its share price falling by more than 50 per cent. DoorDash, by contrast, was valued at about £56bn ($71bn) when it went public in 2020 and has largely maintained that valuation.
Another major deal followed in December when US private equity firm KKR confirmed its £4.8bn takeover of Spectris, the London-listed industrial group that produces precision instruments.
The valuation gap attracting overseas bidders
According to Patrick Sarch, head of UK public M&A at White & Case, overseas buyers appear drawn to the pricing gap between British and American companies. International bidders are attracted by the “relative valuations and many undervalued businesses” in the UK, he reportedly said in a news report.
Research by McKinsey points to the same issue. The consultancy found that the UK’s average EV/EBITDA multiple — a common measure comparing company value with earnings — stands at around 7.7. In the US the equivalent figure is roughly 13.8.
However, the report suggested that the gap is partly influenced by the dominance of major technology companies in the US, which have significantly boosted average valuations.
“The relative underperformance of the largest UK companies, as well as the absence of significant outliers, has tended to have a detrimental effect on valuations,” the report noted.
Fewer domestic deals as uncertainty lingers
While foreign buyers were active, dealmaking among UK companies slowed sharply. The total value of domestic mergers and acquisitions fell to £1.8bn in the quarter, down from £7.1bn previously.
UK companies also completed fewer overseas purchases. Outward M&A — where British firms acquire businesses abroad — dropped to £1.7bn from £3.4bn in the previous quarter.
Looking ahead to 2026, some advisers expect companies to remain cautious about major acquisitions. Helen Brocklebank, head of M&A at RSM, reportedly said global geopolitical tensions and the knock-on effects on inflation could discourage large transactions.
Even so, certain industries may continue to attract buyers. Businesses with strong recurring revenues — particularly in professional services, healthcare, technology and industrials — are likely to remain appealing targets for investors searching for stable returns.
