Public to private transactions – public M&A

While strong momentum from Q4 2025 continued into 2026, it was curtailed in late Q1 and Q2 this year. Rather than being driven by tariff trade wars, it was driven by sharp macroeconomic volatility caused by disruptions to global energy and shipping routes following heightened tensions from the US and Iran conflicts and subsequent closures of the Strait of Hormuz. The resulting spike in freight costs, oil‑price volatility and supply‑chain delays fed directly into global equity markets, initially driving down public‑company valuations across UK and Europe. However, as in recent years, this volatility has ultimately increased the relative appeal of UK and European public markets. UK‑listed companies continue to trade at a meaningful discount to US peers, widening the valuation gap and making “take‑private” routes increasingly attractive for US Sponsors. This combined with the general consensus that private equity funds still hold large levels of undeployed capital, (subject to any further continued geopolitical‑driven volatility if tensions in key global trade corridors through the second half of the year) the appetite for public‑to‑private transactions appear well‑positioned to continue into Q3 and Q4 2026.

In this article, we consider some of the key considerations that Sponsors/bidders should take into account when considering a public-to-private transaction involving a UK-listed target against the backdrop of the current market and the ongoing macroeconomic environment in the face continued macroeconomic volatility in relation to global conflicts and resulting supply chain issues.

Key considerations for Sponsors

Target company pricing

General market volatility, declining share prices and wider macroeconomic pressures mean that determining an appropriate valuation for a target UK public company is increasingly complex. Although multiple sectors have experienced share price declines driven by tariffs and the broader macroeconomic backdrop, companies in certain industries such as consumer goods, energy and mining/natural resources have been particularly affected, with sharp losses – and subsequent rebounds – making it challenging to assess both future prospects and the current pricing of a potential target. This environment has led to some relatively recent market entrants to “take companies back private”. While such decisions stem from a range of factors, including disparities between equity value and the underlying enterprise value, they can create opportunities for Sponsors seeking to acquire strong businesses at discounted valuations.

Accordingly, Sponsors face a set of multi‑layered pricing considerations, including:

• Valuation messaging and the rationale supporting the offer price;
• Liquidity profile of the target;
• Shareholder base of the target; and
• Board composition of the target company.

These represent examples of the high‑level issues that must be evaluated when determining pricing in the context of current market conditions and volatility. Pricing remains a critical step for Sponsors, requiring careful judgement to ensure that the valuation appropriately reflects, and effectively navigates, the various factors necessary for a successful transaction.

Acquiring an early stake

It is common for Sponsors pursuing UK public targets to begin by acquiring a small initial stake, particularly in competitive situations. However, Sponsors should recognise that any market purchases made before a subsequent acquisition offer remain directly relevant to the price that must be offered under a later bid, pursuant to the UK City Code on Takeovers and Mergers (the Code).

In practical terms, if a bidder or its ‘concert party’ (as defined under the Code) acquires an interest in shares in the target during either:

• the three‑month period prior to the offer period; or
• the period between commencement of the offer period and the bidder’s announcement of a firm intention to make an offer.

then the bidder’s offer must not be made on less favourable terms. In other words, the per‑share offer price cannot be lower than the highest price paid for any shares acquired by the Sponsor (or its concert party) during these periods. Where the bidder has paid, or proposes to pay, non‑cash consideration, the Code requires equivalence so that target shareholders are offered consideration at least as favourable in overall value and terms as the most favourable consideration previously paid. Sponsors should factor in that mixed or securities‑only consideration given in stake building may need to be replicated or matched in value, and evidence of valuation methodology and any adjustments may be scrutinised.

In a volatile market, particularly one in which share prices may continue to fall, an early stake can therefore lock a Sponsor into a minimum price that restricts its ability to secure optimal terms for the acquisition.

This issue also arises in the context of Rule 9 mandatory bids under the Code. For Rule 9 purposes, “interests in shares” is interpreted broadly and can capture not only shares and voting rights held outright but also economic or voting exposures obtained through options, derivatives and agreements to acquire shares. Sponsors should map all direct and synthetic positions, as well as any agreements that may confer control over, or an obligation to acquire, shares when assessing proximity to the 30% threshold and the increment threshold between 30% and 50%. Any acquisition, even of a single share, may trigger a mandatory bid obligation if it results in the bidder’s or concert party’s aggregate holding reaching 30% or more of the voting rights, or, where they already hold between 30% and 50%, if it increases the percentage of voting rights in which they are interested. As a result, bidders must review all prior acquisitions (including those of concert party members), as they may find themselves bound to an earlier, less favourable price if a further purchase causes them to cross a Code threshold. These Code‑driven considerations are fundamental to public‑to‑private transactions, and bidders should engage advisers early when contemplating stake‑building.

It is additionally worth noting that not all publicly listed companies in UK are incorporated and domiciled in the UK and therefore may not be subject to the Code . Whether the Code applies turns on the Takeover Panel’s residency‑based jurisdictional tests for UK, Channel Islands or Isle of Man companies, rather than simply the place of incorporation or domicile. Sponsors should seek early confirmation of Code jurisdiction from advisers. Company’s articles of association may include takeover‑style provisions, but these are not a substitute for the Code and do not confer Takeover Panel supervision.

Structuring public takeovers – scheme of arrangement

One of the most common approaches for a potential bidder to structure a UK public‑to‑private transaction is through a scheme of arrangement. A scheme enables the bidder to obtain 100% ownership of the target UK public company. Although it is frequently the preferred method, bidders should be aware that a scheme of arrangement requires approval by a majority in number of the target company’s shareholders, representing at least 75% in value of the shares voted, followed by court sanction. The court process involves (a) a convening hearing to approve the meeting and shareholder documentation and (b) a sanction hearing after the shareholder vote. The scheme becomes effective only upon delivery of the court order to the registrar.

As such, the process involves a defined procedural framework, which necessitates the involvement of local UK advisers for the bidder and the target. Before pursuing a scheme of arrangement, Sponsors will need to understand the overall deal structure and the procedural steps associated with a scheme of arrangement, in order to assess whether this route is suitable. The alternative route being the “offer” route.

As an alternative, a bidder may proceed by way of a contractual takeover offer. Acceptance conditions are typically set at more than 50% of the voting rights to achieve control, with statutory ‘squeeze‑out’ becoming available at 90% of shares to which the offer relates, enabling compulsory acquisition of remaining shares; a 90% sell‑out right is available to minority shareholders. Contractual offers can provide greater flexibility on timing of acceptances and allow incremental stake building, but closing mechanics can be more complex than a single‑step scheme and achieving squeeze‑out may take longer if thresholds are not reached promptly.

Acquisition financing

With public company share values declining across markets, particularly amid recent technology/AI company sell‑offs, where prices have fallen and then rebounded over the past few months, lenders may be reluctant or unwilling to provide debt financing to Sponsors as the cost of debt continues to rise.

Given heightened volatility and uncertainty, lenders face increased difficulty in assessing a Sponsor’s future ability to repay debt, largely because of the unpredictable financial performance of potential target businesses. As a result, Sponsors should carefully consider debt‑backed acquisitions.

It is also important to note that under the Code, a cash bid must be made on a “certain funds” basis. Financing conditions are tightly limited, and the bidder’s financial adviser will be required to give a cash confirmation that resources are available to satisfy full acceptance of the offer or full implementation of the scheme, subject only to limited exceptions. Taken together with current market volatility, these Code requirements may contribute to a scarcity of available financing for transactions. Accordingly, Sponsors must give careful consideration to debt financing options as part of any proposed acquisition.

Foreign investment review and scrutiny

Scrutiny of foreign investment into the UK continues to intensify, driven by ongoing global instability and conflicts that have heightened the importance of safeguarding strategically significant industries, including rare earth/minerals, technology/AI and energy/oil and gas. For example, the continuing energy‑supply crisis linked to hostilities in and around Iran and the closure of the Strait of Hormuz underscores the geopolitical sensitivity of these sectors. Governments worldwide have adopted measures to protect industries and companies considered economically or nationally strategic, particularly in the minerals and energy/power sectors, with strategic stockpiling emerging as a key protectionist tactic.

Sponsors considering the acquisition of a UK public company must assess the implications of the National Security and Investment Act 2021 (NSIA). The NSIA empowers the UK government to review – and potentially block – acquisitions and investments in sectors that may affect national security. The NSIA imposes a standstill on acquisitions in notifiable sectors until clearance, with civil and criminal penalties for non‑compliance. The government may impose conditions, require unwinding or, in some cases, render a transaction void. Transactions completed without notification remain exposed to call‑in and remedies for a defined period. Sponsors should assess mandatory and voluntary notification routes early and build the NSIA timetable into the overall Code timetable.

Due diligence

As a result of applicable listing rules and ongoing disclosure obligations on a UK-listed company, a significant amount of information is already publicly available, meaning that only confirmatory or high‑level due diligence is typically required or accepted by a target’s board. Equal information obligations under the Code extend to information actually provided by the target to one bidder and do not require the target to generate new information it does not already hold. Targets typically limit diligence to information that can be shared on an equal basis with any bona fide competing bidder.

In certain industries, US Sponsors considering the acquisition of a UK-listed company must also take into account the sanctions regimes imposed by both the UK and the US. As the two jurisdictions maintain separate sanctions frameworks, Sponsors should assess whether any assets of the target are owned by companies or individuals designated under either regime. Given that each country maintains its own list of sanctioned persons and entities, Sponsors must evaluate whether conduct permitted under UK sanctions is also permissible under US sanctions, and vice versa.

Due diligence therefore becomes a critical process for Sponsors to understand the ownership structure of the target and to assess their obligations under both sanctions’ regimes, including how acquiring the target may affect those obligations.

Break fees

Sponsors may already be familiar with the concept of a break fee – a fee payable by a target to a bidder if a takeover offer does not proceed. However, Sponsors should note that break fees are generally prohibited under the Code. The Takeover Panel should be consulted in advance and its consent will be required for any permitted break fee, which will be closely scrutinised as to quantum, triggers and overall effect on shareholder choice. The only exceptions are:

• where the target has announced that it is seeking one or more potential bidders through a formal sale process; or
• where a hostile firm offer has been announced, allowing the target to agree a break fee with a recommended “white knight” (i.e., a potential counter‑bidder) if the target is in serious financial difficulty.

Any permitted break fee must be agreed no later than the announcement of a firm offer, capped at no more than 1% of the aggregate offer value on a fully diluted basis and payable only if another offer becomes or is declared unconditional.

Importantly, it is worth noting that the Code does not prohibit a bidder from agreeing to pay a reverse break fee – a fee payable by the bidder to the target if the offer fails to proceed for specified reasons. Noting reverse break fees do remain subject to Takeover Panel scrutiny. As such, break‑fee arrangements must be carefully structured by Sponsors who should seek appropriate professional legal advice.

Timeline for acquisition

Once a possible or firm offer is announced, the Code imposes a disciplined timetable with specified milestones for the posting of offer or scheme documentation, satisfaction of conditions and announcement obligations. The Takeover Panel may grant extensions where required to accommodate regulatory and merger control clearances, including NSIA, and parties should engage early with advisers and the Takeover Panel to align clearance timetables with Code deadlines.

With ongoing pressures on global energy supply, continuing geopolitical conflicts, and the sustained impact of Russian‑related sanctions, Sponsors should anticipate that acquisition timelines may become extended or protracted as these issues are navigated. From our experience we have been seeing transactions having longer lead times which then need to be considered and prepared for, as well as funded.

It is therefore essential for Sponsors to engage legal counsel at an early stage to ensure that any legal or regulatory filings and requirements can be addressed as efficiently as possible, avoiding last‑minute obstacles. Specific timing considerations also arise where regulatory or merger‑control conditions must be satisfied before completion. Early consultation with legal counsel is particularly important in relation to NSIA notifications, which, where required, must be made prior to completion.

How Blake Morgan can help

Blake Morgan is a full-service national law firm with offices in London, Cardiff, Oxford, Reading, Southampton and Manchester. Our experienced Equity Capital Markets team is able to guide any interested Sponsors or Rule 3 advisers through the process of acquiring a publicly listed UK company, including the necessary legal and regulatory advice before, during and after the acquisition. If you would like to discuss anything in this article, or need any further guidance, please contact Blake Morgan’s Equity Capital Markets team.

This article provides general information on public to private transactions. It does not constitute legal or regulatory advice and should not be relied upon as such. Specific advice should be obtained based on your circumstances.