Hello everybody, and welcome to another edition of C&F Talks. Today, I have with me Patrick Sarch, who's a Partner and Head of UK Public M&A at White & Case. Patrick is a Partner in the global M&A and corporate practice team based in London, and he leads the UK Public M&A practice, has some 30 years of experience, so I'm sure that we're going to hear some insights from him today and at our forthcoming conference. Patrick will be speaking at the M&A Summit, which is being held in London on the 24th of November. Patrick, welcome.

Thank you, hi.

It's great to have you with us.

Patrick, your session at the Summit focuses on the practical and tactical factors to consider in a competitive bidding situation. Is this something which you are seeing more of, and what are the factors that need to be considered?

Thank you, we look forward to discussing that. It's one of the most exciting bits of public M&A and what those of us who practice in this area look forward to most of all. We hope for a hostile bid every now and then as well, but the sort of halfway house between a bilateral straightforward vanilla transaction and a fully hostile kind of war is a competitive situation. And we've seen more of those last year and this year than any year since 2016, so it's kind of peaking. This year to date we've seen I think 10 actual competing offers for the same targets and the same number last year, but there's obviously a few more months for this year to go. 

I would add that behind the scenes we are seeing multiple bidders looking at the same targets, so it's highly infuriating for those of us who've been stalking a target for months and often even years or certainly a year, plus to see it snaffled from underneath our noses, but there are a number of those situations where the public bids have not come to market observably, so we are seeing a slightly odd sort of swarming effect in the market where a number of bidders look at the same target. In a few cases, very interestingly, there's been a sponsor, a financial sponsor, a private equity house on one side and a corporate on the other, so you're really comparing shelves or comparing a financial sponsor's ability to pay with using leverage structures as against a corporate's ability to pay, essentially offering shares in itself and or with synergies, so very different transactions and we've seen those play out in different ways.

Okay.

And how would you characterise that the current trends in the UK public M&A market? Are you seeing any shifts in deal dynamics, structures, or bidder behaviour over the last year?

Well, it's certainly been very busy. I think at the very beginning of 2025, we were still all hoping for a surge in deals following the various elections, UK, US, Germany and elsewhere. That really manifests itself only in very small transactions in UK public M&A in the first couple of months of the year.

So, there were quite a few, but they were single-digit billions or double-digit, not major transactions. Now, as we've turned the end of the third quarter, actually, deal volumes are up. There have been 47 firm offers in the year to the end of September compared to 40 last year, but actually, aggregate deal value is down.

So, this year to the end of September, 33.7 billion, whereas it was 47.3 the equivalent period last year. Now, that's only a few mega deals, as I've recently seen them defined being 5 billion and over between last year and this year. And we're currently working on easily enough such deals that if they actually happened would exceed last year's value as well as volume.

So, during the year, we've seen some ups and downs. July was very busy just before what turned out to be a little bit of a summer break. So, we saw five firm offers for nearly 10 billion pounds. Things did really slow down in August. Partly, we were grateful in terms of our team having a bit of breathing space after incredibly busy few months. Things then really picked up in earnest in September, and our run rate is very high.

And the reason for that, I think, as a whole is the fact that we're seeing both corporates and financial sponsors busy at the same time. And those financial sponsors are traditional private equity. Some of the bigger household name funds have been incredibly active and willing to compete in the market for assets, but also sovereign wealth funds and others and Canadian and Australian pension funds, for example, some infrastructure funds.

So, the whole spectrum of financial sponsors, excuse me, a combination of both European and North American corporates. And that is really what's driving the flow of business, the higher value deals as compared to smaller deals tend to be more domestic, bigger deals tend to be more international and the competitive processes. So, that's how we see it.

I mean, at one point, I think of the half year, 92% of bids have been announced by Anglo-Saxon bidders. So, UK, American, Canadian, really dominating. And then European corporates have come back since.

I would just finish off, though, with two points. One is some sectors are very hot. Financial services and technology have been very active. After many years of no bank M&A, we've seen quite a lot with various banks being acquired and banks being acquirers, as opposed to divestors of businesses. We've seen a lot of activity in real estate investment trusts, REITs, including the big box companies. And as I say, technology.

And the final point I pull out is equity offers. So, partly because corporates are busy, many of them are offering stock. And in fact, 50% of all bids by listed companies last year and this year included an equity component.

Now, the strong equity valuations we're seeing in the UK, you know, FTSE's been an outperformer internationally and had its best year for a long time, long may to continue. Those strong equity valuations have meant bidders are more willing to use their stock as currency and target shelves have obviously been more willing to accept it. At the same time, there's been a slightly counterintuitive point that as equity values are strengthened, people are more willing to buy UK targets.

And then for financial sponsors, around 20 to 25% of all offers by PE bidders in 2024 and 2025 have offered an equity rollover option. We call it stub equity. Again, quite good fun for those who are structuring these transactions.

Takeover panel has recently put out some new guidance codifying various points of concern to make sure that stub equity is genuinely something attractive to all target shareholders or equally attractive to all target shareholders who get a fair crack at the whip in terms of governance rights and so forth. So, increased use of equity, certain hot sectors, everything to hope for on deal volume and value for the end of the year. And our pipeline certainly demonstrates that this will be a bumper year, best since 2021, if a reasonable proportion of our deals go through.

Yeah, well, thank you for that third reason. It sounds like things have picked up considerably after the rather weak years that have preceded.

And with the increased regulatory scrutiny and the evolving market conditions, how are bidders and targets adapting their tactics in what is a somewhat more competitive environment?

Well, just picking up the last point, so where different bidders are competing for a target. To state the obvious, and it's not always considered helpful, paying the highest price will get you the strongest chance of success and the most shareholder support. Very often though, we've seen bidders in the last 18 to 24 months, for the first time in years really, switching from schemes to offers.

We did the first two of those in the market and with a new-ish offer timetable where you have to go up to day 60, you can't close the offer early, except for very limited circumstances. There's been a lot of people learning really how to do them and the market learning how the dynamics work with lots of merger arms and other short-term shareholders also having to reassess their tactics. So, in competitive situations, one of the factors has been switching the mechanism from scheme to an offer, having a lower acceptance condition, making sure your financing can accommodate a lower acceptance condition, potentially waiving conditions.

So, to be competitive, we have seen some bidders accepting the UK competition merger control risk, so having no CMA condition to the deal, or other similar regulatory conditions being absorbed by the bidder where legally possible. We've also seen a real spike, very excitingly for me, in stake building. We've seen 10 bidders over the last just over a year acquiring material shareholdings in the target before a bid or during a bid to secure success.

That hasn't happened for many years, and it raises lots and lots of questions about market abuse, you know, merger control and regulatory thresholds, tactical questions, how the shares can be counted depending on when you buy them towards voting on scheme or acceptance of an offer towards the squeeze-out threshold. Lots of interesting stuff there we look forward to talking about at the conference. And then finally, in a more sort of, in a narrower regulatory sense, beyond even those conditions that are absorbed by bidders, we have seen a lot of negotiation on the obligations on bidders to obtain clearances.

So, in simple terms, hell or high water, we call it, where the bidder is required to come hell or high water to get the deal through, to throw anything overboard, dispose of anything, give any remedy that the competition authorities may require to get the deal through. In a competitive situation where a target has a lot of negotiating power and an interloper needs to be very compelling at either a similar price or even the same price sometimes, unless it's paying a lot more, the target board isn't going to withdraw its recommendation from bidder number one and attach it to bidder number two without a high degree of comfort that the deal will go through. And in that case, very strong obligations on the bidder to get their consents.

That manifests itself in either hell or high water obligations, as we call them, or even reverse break fees, where if the bidder fails to get the consent, it pays a break fee to the target. And we have seen four or five of those in the last year or so. On the other hand, outside those competitive situations, we've seen bidders being more and more hawkish and not wanting to have very broad conditions and wanting to retain their ability to negotiate with competition authorities.

So that's been a real battleground between bidders and targets. And I would say the spectrum of outcomes in terms of the contractual finishing position is broader than it has been in recent years. So that's been a real cutting edge of negotiations over the last year.

Thank you for that. You shared some very, very interesting insights, Patrick. Sadly, I think we're probably out of time in this particular discussion.

However, for our viewers, I just remind you that if you'd like to hear more on this and related topics, do visit our website, www.cityandfinancial.com and search for the M&A Summit being held in London on the 24th of November. Very much hope that you'll be able to join us there.

Patrick, thank you very much for your time today.

Thank you, Maurice. Look forward to seeing you there.