A trio of megadeals has UK take-private transactions on track for their highest annual total since at least 2021.

Private equity-backed public-to-private transactions totaled $20.68 billion in announced value between Jan. 1 and Aug. 26, according to S&P Global Market Intelligence data. The amount already exceeds the announced value of UK take-privates in the previous two years combined.

The increase in UK take-private transaction value was taking place amid a global acceleration in such deals, as private equity funds scour public markets for listed companies at attractive valuations. The announced value of take-privates globally was on pace for a 61% year-over-year increase in 2024 as of Aug. 26, according to Market Intelligence data.

A publicly traded company's share price also gives private equity fund managers "something to aim at" as they plan an acquisition and formulate a value-creation plan, said Leon Gillespie, London-based managing director and co-head of European sponsor coverage for Houlihan Lokey. Private market valuations remain murky after a sharp spike in interest rates prompted a reset in valuations two years ago.

"In a period when it's been difficult to transact with private companies, it is quite natural to look at the public markets," Gillespie said.

Converging trends

The UK's surging take-private value reflects a confluence of global private equity trends, including the mounting pressure on private equity firms to chip away at a massive but aging pile of dry powder and the sluggish pace of exits, said Allan Bertie, head of Raymond James' European investment banking practice. Secondary buyouts typically are a significant source of private equity deal flow, but firms are holding portfolio companies longer as they wait for exit conditions to improve.

"If you're one of the large firms that need to be deploying in billion-dollar chunks, there aren't many assets coming out of private equity of that scale or quality. And if they are, they're really aggressively chased, and pricing is very high. Being able to unlock a public company is quite a good way of working your way into a sizable, fast-growing company," Bertie said.

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Buyout fund managers' comfort with using large amounts of debt to fuel growth may also make them more closely aligned with the management of businesses targeted in takeovers. The public markets, by comparison, "tend not to like a high amount of leverage," Bertie said.

"I do think that there's an element of that coming from the management teams in public companies. Growth isn't being valued. Or indeed the growth engine of acquisitions or portfolio purchases, things like that are not being supported," Bertie said.

UK surge

The trio of deals powering the UK's rise in take-private value are Energy Capital Partners LLC's planned $7.9 billion acquisition of renewable energy utility Atlantica Sustainable Infrastructure PLC; Thoma Bravo LP's pending $5.2 billion acquisition of cybersecurity business Darktrace PLC; and the proposed $6.9 billion acquisition of investment platform Hargreaves Lansdown PLC by a private equity consortium including CVC Capital Partners PLC, Nordic Capital and a subsidiary of Abu Dhabi Investment Authority.

The combined value of the three deals was higher than the announced value of all 15 private equity-backed going-private transactions to target UK businesses over the previous two years.

The UK's technology, media and telecommunications sector — the source of the Darktrace deal — has been the top target for UK public-to-private transactions over the past five-plus years.