Plenty of foreign companies have raided corporate Britain in recent years. Now the tables are turned.
St Modwen Properties (LSE:SMP) and UDG Healthcare (LSE:UDG) are the latest British businesses in the sights of private equity buyers, with others prior to this week including Aggreko (LSE:AGK), Signature Aviation (LSE:SIG) and G4S.
But it's not all one-way traffic after testing services business Intertek swooped for Australia's SAI Global Assurance, and cyber security firm NCC took a big step in the US market with plans to buy Iron Mountain's intellectual property management business.
Their initiatives enabled shares to make headway in an otherwise grim session for markets, with Intertek for a while the only FTSE 100 index riser before settling 8p higher at 5,816p.
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NCC, which was spun out of the National Computing Centre in 1999, continues to trade near multi-year highs in the FTSE 250 index, after shares jumped 31p to 285p on the back of its “strategically and financially compelling” acquisition.
Confidence in the cyber-crime fighting company was highlighted when City investors snapped up new shares in a fundraising staged ahead of the £156 million deal.
NCC secured a bigger-than-expected £72.5 million from investors after placing new shares at 260p, a discount of just 3.4% on the prevailing mid-market price.
Chief executive Adam Palser said the proposed deal made NCC the market leader in software resilience services, while it also presented the chance to offer new services and support to Iron Mountain's blue-chip clients.
He said: “NCC will be a stronger and broader business with an even greater ability to support clients in the ceaseless struggle against cyber-crime in all its forms."
The company was valued at £55 million when it joined the stock market in 2004, but is now worth closer to £800 million after half-year results recently showed profits rose 19% to £10.7 million in the six months to 30 November.
The market had been growing 8-9% before Covid-19, but after disruption to spending caused by pandemic NCC believes there's now a “compliance debt” that will have to be paid down. In addition, the recent growth of cloud services and the significant rise in home working has put more companies at increased risk of cyber attacks.
The thinking behind Intertek's move
Intertek's deal is also part of its positioning for a post-pandemic world as customers increase their focus on quality assurance and the sustainability of their products and services.
The addition of SAI Global Assurance brings Intertek new service capabilities in attractive end-markets including food, agriculture and fast-food restaurants. The target company is the market leader in Australia and has decent positions in the US, Canada and the UK as well as a fast-growing business in China.
Intertek CEO Andre Lacroix called the deal an “excellent strategic fit”, with the potential to deliver robust organic growth and significant margin improvement.
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The shares were today 20p higher at 5,828p, having fallen back from the record high of 6,440p in early October. Other favourable Covid-19 trends include Intertek helping more customers to achieve safer and more diversified supply chains with greater traceability.
Its strong balance sheet recently enabled the company to maintain its full-year dividend, having previously been the FTSE’s leading company in terms of dividend progression between 2003 and 2019, with a compound annual growth rate of 17%.
UBS analysts have a price target of 7,000p. They said today: “We expect assurance services to be a high growth area as customers increase their focus on safety and sustainability.”
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