Bargain Britain – How the UK became a hunting ground for Private Equity

Private equity investors are circling over several UK publicly listed companies they consider attractively priced, and the latest target is Intertek, a laboratory equipment tester whose share price has lagged US peers, drawing the attention of Swedish private equity firm EQT. After a series of escalating bids, reaching a 60% premium to the pre-bid share price, the £10.6 billion acquisition looks set to be accepted by shareholders.

Like many acquisition targets, Intertek generates the majority of its operational income overseas, allowing private investment firms to acquire global businesses trading at UK market prices.

While notable for its size, this is the third FTSE 100 company set to be acquired by an international investor this year and is reportedly the 22nd buyout or delisting from the wider UK market. This month also saw a £2.7 billion offer for the 150-year-old sugar refiner Tate & Lyle, whose stock jumped 45% on receipt of the offer from an American rival.

Currently, the US market has entered elevated territory, trading at a price-to-earnings ratio of nearly 22, following a steady increase over the last decade.

In contrast, the UK market trades at a ratio of around 13, declining over the last 10 years, and making the US notably more expensive on this metric.

This has provided an opportunity for deep-pocketed global investors, targeting profitable, internationally competitive companies languishing at what they see as bargain multiples relative to global equivalents.

For instance, private equity firm CVC Capital Partners led a consortium to acquire financial services provider Hargreaves Lansdown for £5.4 billion. Similarly, Canadian private equity firm Brookfield Asset Management completed a number of UK-listed takeovers, including digital payments provider Network International and distribution centre investment company Tritax Eurobox, both previous FTSE 250 constituents.

European private equity firms are also active, with EQT acquiring AIM-quoted video game developer Keywords Studios for £2.1 billion.

The exodus includes several high-profile departures, from travel operator TUI moving to the Frankfurt Stock Exchange to British chip designer Arm Holdings, a former FTSE 100 company.

After a seven-year spell as a private company, it shunned the LSE when it relisted, choosing instead the NYSE, where it achieved a valuation nearly double its original purchase price, after a successful first day of trading.

Consequently, many investors in British equity markets have found themselves on the outside looking in, as former index constituents and exciting would-be entrants operate in the private markets.

Those who wish to capture the true value of the UK economy could consider following the lead of global private equity and get some exposure to private markets.

Until fairly recently, this would have been difficult, as Private Equity investments were most commonly associated with highly illiquid, closed-ended vehicles with long capital lock-up periods and significant minimum investment requirements, often around £5-10 million. However, the emergence of Semi-Liquid Funds has opened private markets to eligible private investors by providing a more liquid vehicle with far lower investment minimums and which allow subscriptions and redemptions on a rolling basis (although these can be subject to restrictions).

At Wealth Club, these funds can be accessed through our Private Markets platform, which enables access to funds from some of the largest managers across the private market spectrum, including Private Equity, Private Credit, Secondaries, and Infrastructure vehicles – each reviewed by our in-house research team. The minimum investment starts at £8,100.

You can invest directly in each fund or, in many cases, through our new Private Market SIPP, so you can benefit from the tax-efficient structure of a pension.

It must be noted, of course, that while the opportunities in private markets could be compelling, they still carry distinct and elevated risks. These investments could take many years to generate a return, if at all, and should be approached as long-term commitments. Additionally, they are high-risk investments and vulnerable to heightened levels of pricing uncertainty compared to publicly traded alternatives: you should not invest money you cannot afford to lose.