“Move fast and break things.” The famous motto from Mark Zuckerberg of Facebook parent Meta [NASDAQ:META] is being taken very seriously in the UK.
The country’s Financial Conduct Authority (FCA) is moving ahead with plans to reinvigorate IPOs in London. The new listing regime rules will emphasise disclosure more than box-ticking.
Changes include removing mandatory shareholder votes on some deals, which will put responsibility on boards rather than needing a broad consensus among investors. Mandatory votes can act as a brake on quick and opportunistic deals, one banker suggested.
A&O Shearman Partner James Roe said: “The changes will facilitate deals from growth, and new economy, companies, hopefully also in tech and clean tech, bio/pharma and emerging sectors. These companies may not have a three-year track record and may have grown via acquisitions, which may have previously caused them to be ineligible.”
Acquisitions by UK-listed companies (excluding listed private equity firms, club deals and fundraising rounds) hit a decade-long record of GBP 90.4bn (EUR 107.5bn) over 739 deals in 2016, according to Mergermarket data.
Activity was in the range of GBP 63.3bn to GBP 77.7bn between 2017 and 2020, only to fall sharply in 2021 to 2023, with a range of GBP 35.6bn to GBP 50.3bn, with numbers falling through the period.
The year to date (YTD) data is showing strong results so far, with GBP 28.9bn over 187 deals, which is close to the full-year figure of GBP 35.6bn for 2023.
The largest deal of the year so far has been LondonMetric Property‘s [LON:LMP] all-shares takeover of real estate investment trust (REIT) LXi REIT [LON:LXI], worth GBP 2.9bn which completed in March.
Some shareholders are more equal than others
The FCA has also realised that global investors are prepared to accept dual-class share structures (DCSS) for large tech companies. It will let UK-listed companies adapt these structures, which should allow small groups of core shareholders to act decisively when it comes to M&A without seeking a consensus.
The reforms were prompted by concerns that too many UK-listed companies were seen as “old economy,” Roe said. The move to weighted voting rights potentially accommodates the pre-existing capital structure of innovative companies in a way that was not possible before, he added.
Ambitious tech companies in spotlight
Acquisitive tech companies in the UK IPO pipeline include CK Hutchison’s [HKG:0001] European telco division, which announced a deal in Italy earlier this year.
Meanwhile, data analytics platform Quantexa is looking at acquisitions to help accelerate its expansion as it prepares an IPO in a couple of years. And eToro, a trading platform from Israel, is excited about M&A as it plots an IPO in London or New York.
The FCA clearly hopes that tech executives who appreciate the ability to move fast while breaking things will come to see London as just a good venue for an IPO as New York.