Mergers and acquisitions are booming in the UK. But the market for initial public offerings - when a company first sells shares to the public - is still quiet. That contrast is the story from Tiina Lee, the CEO of Citi in the UK. She described the M&A scene as "on fire."
Last year, the total number of UK deals dropped around 12%. However, the combined worth of all transactions climbed by about 12%. The reason: average deal size soared 30%. That means fewer but bigger transactions.
Several large deals stand out. Anglo American and Teck Resources completed a cross-border merger worth £15.2 billion. Insurer Aviva took over Direct Line for £3.7 billion. And DoorDash acquired Deliveroo for £3.9 billion.
Lee pointed to a key driver: "It's being driven by the ongoing theme around U.K. plc simplification." Large companies are streamlining portfolios to focus on core operations. For instance, McCormick's deal with Unilever's food division and Diageo's divestiture of its Indian cricket team are examples. Rosebank acquired MW Components earlier this year.
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International acquirers continue to show strong appetite for UK companies. One major factor is the valuation disparity between UK and US markets, Lee added. She noted that mature British firms with dependable cash flows and solid operations remain very attractive to foreign buyers.
The persistent gap between UK and US stock valuations has made British companies appealing takeover targets. Many mature UK firms trade at lower multiples than their US peers, encouraging overseas buyers to pursue acquisitions. This dynamic, combined with the push for corporate simplification, has fueled the surge in dealmaking.
While M&A is hot, the IPO market is lukewarm. Over the whole of 2025, 23 companies listed on the London Stock Exchange, according to EY data. Nine of those were on the main market, and 14 were on the junior AIM market.
The £2.1 billion raised represented a 170% jump compared to the year prior. However, the FCA reported just two IPOs in the first quarter, only one on the main market.
That shows the market for new listings is still slow. Lee stated that M&A is providing "the main momentum" in UK capital markets, contrasting with the relatively subdued IPO market.
That focus creates deal flow.
A UK company earning steady cash flow can seem cheap compared to a similar US firm. That gap draws buyers.
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