London Stock Market Faces Fastest Decline Since 2010

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About 25 companies have delisted from the London market due to mergers and acquisitions.

The London stock market is shrinking at the quickest rate in over ten years due to the takeover of London-listed businesses.

About 25 companies have delisted from the London market due to mergers and acquisitions, which is more than 10% of the total number for the previous year.

It is the highest number of companies to exit the market since 2010. It coincides with the 81% increase in deals targeting UK companies of over $160 billion.

Foreign private equity firms have been especially active, with the US-based Starwood Capital Group closing its acquisition of London-listed Balanced Commercial Property Trust Ltd worth £674 million ($852 million).

In recent weeks, Thoma Bravo closed its $5.3 billion acquisition of cybersecurity software supplier Darktrace Plc, while Sweden’s EQT AB completed its £2.1 billion acquisition of videogame services company Keywords Studios Plc.

UK stocks are trading at a record discount of more than 40% to their global peers, which shows how the British stock market continues to be popular among bargain seekers.

Many listings are mid-cap companies listed on the London AIM market with low analyst coverage and low trading volumes.

Czech billionaire Daniel Kretinsky agreed to buy Royal Mail in a deal valued at roughly £3.6 billion, one of the largest cross-border transactions.

Meanwhile,  Britvic Plc, the UK’s Pepsi bottler, was purchased by Carlsberg A/S, a Danish brewer worth an estimated £3.3 billion.

There will be more deals soon.

Amanda Blanc, the CEO of Aviva Plc, is trying to persuade the Direct Line Insurance Group Plc board to engage after making her £3.3 billion takeover bid for the UK auto insurer.

Meanwhile, General Atlantic is negotiating a deal to buy Learning Technologies Group, an online trading company worth £730 million.

The number of listed companies in the United Kingdom is declining due to all these transactions and the lack of initial public offerings in London.

According to recent data, eleven companies have completed London’s initial public offerings (IPO) this year, raising $1 billion. It is an 11% decline in the amount raised in 2023.

At the same time, companies like Flutter Entertainment Plc and JustEat Takeaway NV are moving their primary listings overseas or removing them from the London market.

Joachim Klement, a strategist with the British consultancy company Panmure Liberum Ltd., stated that significant reforms are required if London wants to maintain itself as the financial center of Europe.

The London Stock Exchange, UK investment banks, and regulators need to realize the seriousness of the problem and act quickly, but there are no easy solutions.

UK regulators revised London’s listing regulations this year to encourage more initial public offerings.

Prime Minister Keir Starmer has urged officials to reduce paperwork to promote growth.

UK’s antitrust authority has been investigating ways to close more deals without hurting customers or forcing divesting.

Other stock markets are facing companies leaving their listings. Since they do not see the benefit in staying public, they are buying out companies to make use of their unused capital.

Others like Gatemore’s Meidar believe that the wave of takeovers in the UK may eventually help restore the market by returning the investor’s money, which is used to fund new listings.

According to a spokesperson for bourse operator London Stock Exchange Group, initial public offerings are not the only measure of the strength of the UK capital markets, as the overall number of primary stock offerings is far higher than any of the other European exchanges.

The spokesperson added that the number of businesses aiming to go public is reassuring, and more movement is expected after the listing regulations are revised and implemented.