Takeovers outweighed IPOs three to one on London market in first quarter of 2025

The UK market’s big IPO comeback is conspicuously absent. There were only four floats in the first quarter of 2025 versus fifteen takeover situations, meaning the UK market continues to shrink in size.

Last summer, there was market euphoria about a new government coming into power and how that would create more certainty for businesses. They might not like all policies, but they would know the lay of the land.

IPOs typically take six months from giving the green light to admitting shares to trading. It’s now been nine months since the UK general election and the pace of IPOs is nothing more than a dribble. The names that did join the UK market this year were all tiny, the biggest being activist investment trust Achilles Investment Company with a mere £54 million valuation.

London-listed IPOs in Q1 2025

Source: AJ Bell, company announcements. Excludes International Main Market listings.

Market conditions are not currently favourable for companies to list. Chancellor Rachel Reeves put a spanner in the works last October by increasing employment-related costs for business. That’s forced companies to look at ways to either pass on those costs such as through job cuts or stomach lower margins. It’s created uncertainty and there is more to come, given the prospect of consumers pushing back on further price hikes and potentially voting with their feet.

Making matters worse is how Donald Trump has created considerable uncertainty around the world with his tariff threats. That’s resulted in chaotic market conditions and volatility is the worst scenario for anyone looking to list their shares.

Fundamentally, the UK’s big IPO comeback still hasn’t happened. That’s not the case in the US where there were 75 IPOs in the first quarter. The best performing US IPO is Newsmax which jumped 735% on its first day.

But it’s a different story with M&A. The UK takeover juggernaut has kept on trucking, far outpacing the number of IPOs. It’s the usual situation of unloved UK stocks falling off the radar off for certain investors and then attracting opportunistic bids.

London-listed takeover situations Q1 2025

Source: AJ Bell, company announcements.

The biggest takeover approaches for London stocks in Q1 2025 were Assura’s £1.6 billion bid from KKR, Greencore moving on Bakkavor during the quarter (and on 2 April agreeing in principle a £1.2 billion deal) and Dowlais’ £1.1 billion proposal from American Axle & Manufacturing.

Private equity continues to have a ferocious appetite for UK listed stocks, as do trade buyers looking to acquire a rival to either strengthen a particular skill or enter a new geography.

Persistence is the name of the game, with many suitors making multiple proposals after initially being knocked back. Once one party moves on a stock, others often fancy their chances as well. We saw Assura and Harmony Energy both attracting more than one suitor fighting it out to secure a takeover deal.

Takeovers can take time to play out, even after a board agrees an offer. Shareholders have to vote and competition authorities often get involved if they are worried about the enlarged entity having too dominant a market position. Certain takeover approaches in Q1 have already collapsed and in three situations we’ve got a suitor showing interest but not yet making a formal offer.

The second quarter got off to a bang with Qualcomm expressing interest in potentially buying Alphawave IP. However, Trump’s Liberation Day speech put a spanner in the works by causing financial markets and asset valuations to plunge.

We’re unlikely to see any deals of note until the dust settles on the tariff situation. Once that moment arrives, the next wave of M&A could be interesting if companies have to think about obtaining manufacturing bases in different countries or combining forces to achieve economies of scale.

Past performance is not a guide to future performance and some investments need to be held for the long term.