Chris Hughes’ View to 2022: All Change in the London Market

(Bloomberg Opinion) --

What to Expect:

Could London soon be known more for what arrives on its stock market than what gets taken off it? Private-equity firms feasted wantonly on U.K. stocks in 2021. Bid activity has softened lately and a tougher national-security regime from January threatens to slow takeovers further, with the result that fewer firms leave the London market. At the same time, there could be a further pickup in companies going public in the U.K. if a relaxation of listing standards lures new issues away from other trading venues. The last 12 months were themselves a bumper period, with London initial public offering fundraising at its highest since 2007.

This is therefore a critical juncture for London's capital market post-Brexit. If there is a sharp decline in bids from foreign acquirers, that would suggest Britain's new screening policy has erected a protectionist barrier to inward investment. Expect at least one bold acquirer to test the government's assertions that the U.K. does indeed remain open to most takeovers.

The risk with a more liberal listing regime is that it attracts companies that simply aren't ready to be publicly traded. The first sizeable special purpose acquisition company to take advantage landed in November, with others likely to follow. These blank-check firms need to demonstrate they can bring decent European growth companies to market. London and Amsterdam are vying to be the SPAC center of Europe — a potentially pyrrhic battle. The risk is they chase quantity not quality.

Globally, expect the pressure on companies to simplify to continue following the spate of break-ups announced towards the end of 2021. After the $34 billion leveraged buyout of healthcare firm Medline Industries Inc., the next private-equity deal could be even bigger. The losing buyout bidders in the auction for Wm Morrison have plenty of other grocers to turn their attention to in Europe. Pharmaceutical bosses also look restless. The wildcard deal is a potential $60 billion transaction for GlaxoSmithKline Plc's consumer-healthcare arm, derailing its planned demerger. That would make this year's global deal boom look like it was just the beginning.

From the Year Behind Us:

The Great British Corporate Dumpster Dive: Private equity and other big business bidders follow a recognizable pattern in their search for U.K. acquisitions.

Softbank's Arm Sale Tests Brexit Britain's Mettle: The U.K. may wish it never let the chip designer fall into foreign hands, but blocking this takeover would hurt efforts to lure foreign investment.

Glaxo's Consumer Health Spinoff Comes with Some Headaches (with Andrea Felsted): The drugmaker's huge toothpaste-to-paracetamol business would be better off being sold than de-merged — and it's not too big to find a buyer.

Who's Really Supposed to Pay for your Commute?: The challenge for employers is to maximize savings for staff while keeping the benefit of having people come into work.

Can Firms Ask What Your Parents Did for a Living?: KPMG wants more working-class staff. That means asking some personal questions, but more importantly, being responsible with the answers.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.