- London’s big IPO comeback? Not a chance – there were only four floats in Q1 2025
- More than three times as many takeover situations in the quarter
- It means London’s market continues to shrink in size
- Three potential takeover targets
- Four rumoured London IPOs
“The UK market’s big IPO comeback is conspicuously absent. There were only four floats in the first quarter of 2025 versus 15 takeover situations, meaning the UK market continues to shrink in size,” says Dan Coatsworth, investment analyst at AJ Bell.
“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.
“Market conditions are not currently favourable for companies to list, even though the FTSE 100 has delivered positive returns year-to-date.
“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 a lot of 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 choppy market conditions and volatility is the worst scenario for anyone looking to list their shares.
“Fundamentally, the UK’s big IPO comeback has been derailed. 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. The right-wing cable channel has been labelled a ‘meme stock’ for this performance.
“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 many investors and then attracting opportunistic bids.
“The biggest takeover approaches for London stocks in Q1 2025 were Assura’s £1.6 billion bid from KKR, Greencore’s £1.2 billion agreement in principle for Bakkavor* 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. Several 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 has already got off to a strong start with Qualcomm expressing interest in potentially buying Alphawave IP.”
*Greencore reached an agreement in principle for Bakkavor on 2 April 2025, after initially expressing interest in March.
Potential London-listed takeover targets
“There are some obvious takeover targets for a bidder prepared to look past short-term negative factors. B&M’s share price has halved over the past year as investors fret about a slowdown in growth. Now trading on a mere 7.6 times forward earnings – it’s either a bargain at that price or the market doesn’t believe the earnings forecasts.
“Halfords is another retailer in the doldrums that screens well on valuation grounds. It is ripe for someone to come along and make radical changes to the business model, focusing on areas that it does best and exiting non-core areas.
“Jet2 shares trading at their lowest level since December 2023 won’t have gone unnoticed by private equity firms or rival airlines looking to expand. The holidays company-to-airline operator has a strong market position and a tip-top reputation for good customer service. It just faces near-term turbulence from cost inflation crimping profit margins and an overly cautious consumer reining in their spending.
“Someone looking to own any of these businesses would look at risks and rewards years down the line, not merely what’s around the corner.”
Potential London IPOs this year
“While UK IPOs are happening at a snail’s pace, the rumour mill of new entrants is going into overdrive. The list of names that might list in London grows on a weekly basis.
“Some of the names in the frame include Waterstones which has been reborn as a successful retailer on both sides of the Atlantic. Uzbekistan-based NMMC could help to fill the void for mid and large cap gold miners on the UK market.
“We might see the return of banking group Shawbrook which used to be London-listed until its takeover in 2017. There’s also chatter that CK Hutchison might float its European, Hong Kong and South-East Asian telecoms operations in London. All of these names are a decent size and would be welcome additions to the UK market.”
