Foreign Buyers Circle 'Undervalued' UK Firms as Inward M&A Hits Four-Year High
Foreign buyers continued to target what they perceive as "undervalued" UK companies throughout the final quarter of last year, with new official figures revealing that the value of inward mergers and acquisitions (M&A) has surged to its highest level in four years. The total value of deals where foreign entities acquired British firms skyrocketed to an impressive £27.4 billion between October and December 2025. This represents a staggering increase of nearly £20 billion compared to the previous quarter's figures.
Deal Values Reach Post-2021 Peak
This remarkable quarterly performance has pushed the value of inward M&A activity to its highest point since the second quarter of 2021. According to the Office for National Statistics (ONS), this surge was primarily driven by a significant increase in the number of transactions valued at over £1 billion. The data highlights a continuing trend of prominent listed businesses being purchased by overseas companies, particularly from the United States, further depleting the roster of companies on the UK's public markets.
High-Profile Acquisitions Highlight Valuation Disparities
Several notable transactions underscored this trend during the period. In October, the food delivery platform Deliveroo was formally acquired by its American rival Doordash in a deal worth £2.9 billion. This acquisition starkly illustrated the contrasting fortunes of public companies on opposite sides of the Atlantic. Deliveroo had listed in 2021 with a valuation of £7.6 billion but struggled to maintain investor confidence, with its shares plummeting more than 50 percent post-listing. In sharp contrast, Doordash was valued at $71 billion when it went public in 2020 and has successfully maintained its substantial valuation.
Furthermore, in December, the US private equity giant KKR confirmed its takeover of Spectris, a listed industrials firm specializing in manufacturing precision instruments, in a deal valued at £4.8 billion. Patrick Sarch, head of UK public M&A at the law firm White & Case, commented that international bidders are being drawn to the UK market by "relative valuations and many undervalued businesses."
UK Firms Outshone by US Tech Giants
A recent report from the global consultancy McKinsey provided context for these valuation perceptions. The report showed that the UK's average EV/EBITDA multiple—a key metric comparing a company's valuation to its earnings—stands at 7.7. This figure lags comfortably behind the 13.8 multiple recorded in the United States. However, the McKinsey analysis also noted that this disparity is skewed by the dominance of the largest technology firms in the US, which have massively outperformed the biggest UK companies.
The report stated, "The relative underperformance of the largest UK companies, as well as the absence of significant outliers, has tended to have a detrimental effect on valuations." This environment creates opportunities for foreign acquirers seeking assets they believe are priced below their intrinsic or potential worth.
Domestic and Outward M&A Activity Declines
While inward investment soared, the figures also revealed a contrasting decline in other areas of M&A activity. The value of transactions involving only domestic UK businesses fell sharply to £1.8 billion in the final quarter, down from £7.1 billion in the previous quarter. Similarly, total outward M&A—deals where UK businesses acquire foreign firms—was valued at just £1.7 billion for the quarter, a decrease from £3.4 billion in the prior period.
Outlook for 2026: Caution Amid Global Tensions
Looking ahead to the rest of 2026, industry experts anticipate a more cautious environment for major deal-making. Helen Brocklebank, head of M&A at the audit, tax, and consulting firm RSM, suggested that businesses might be deterred from pursuing large transactions due to "global geopolitical tensions and the knock-on impact on inflation."
She added, "In this environment, industries with strong recurring revenues such as business and professional services, healthcare, technology, and industrials will continue to be seen as the most attractive acquisition targets." This sentiment suggests that while the pace of mega-deals may slow, strategic acquisitions in resilient sectors are likely to persist as buyers seek stability and predictable cash flows in an uncertain economic landscape.
