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Buy British – after all, that’s what US private equity is doing


The fabled “special relationship” between the UK and the US has worn thin in recent years. Warm words have given way to stern warnings on Brexit and surly trade talks. Yet there is one aspect of the relationship that certainly remains special: corporate America’s apparently insatiable appetite for British businesses.

Uncle Sam’s shopping trolley has been filled to overflowing with UK companies since the start of the pandemic, as market panic gave way to a bargain-hunting frenzy that has seen bids for notable names including outsourcer G4S, infrastructure builder John Laing and defence companies Meggitt and Ultra Electronics. This week will mark the next steps in three more buyouts: supermarket Morrisons, inhaler-maker Vectura and bookmaker Entain.

At Morrisons, shareholders are expected to back a takeover by the US private equity firm Clayton, Dubilier & Rice on Tuesday, after a bid battle and auction pumped up its price. On the same day, Vectura’s London-listed shares will be cancelled after its controversial acquisition by cigarette manufacturer Philip Morris.

The buyout of Entain, the owner of the Coral and Ladbrokes betting brands, may still have further to run, but US bidder DraftKings has until Tuesday to put forward a formal offer after approaching with a $22.4bn (£16.4bn) bid that was worth almost double a previous offer by Las Vegas’s MGM Resorts. DraftKings hopes to apply Entain’s UK bookmaking expertise in the US, where deregulation has triggered a breakneck race for what could be one of the world’s most lucrative gambling markets.

The three deals would have a cumulative value of about £25bn before debt is included, adding further to takeovers adding up to £36bn that were completed in the first six months of 2021, according to data from the Office for National Statistics. Foreign buyers may not match 2016’s all-time record (when a few mega-deals skewed the total) but 2021 is still likely to be one of the biggest selloffs in UK corporate history.

Hefty premiums offered by buyers have calmed quibbles from investors up to now, but Tuesday evening may see some quiet “whither Britain” reflection in City pubs. Two camps have emerged in the acquisition spree: blithe spirits who are eminently comfortable with corporate Britain being for sale – for the right price – and others much more uneasy about the star-spangled banner rising over yet more former British assets.

The Morrisons deal does not lend itself well to the optimists’ argument. A share price that still lags behind the level it hit in 2013 – even after taking into account the 61% premium to the undisturbed price squeezed out of a private equity buyer – is not usually indicative of a company with spectacular growth prospects, and analysts expect asset sales in the order of £2.5bn to achieve private-equity levels of return on investment. Politicians are watching (or perhaps bracing themselves) for any job cuts.

Triumphalism on the other two deals might be tempered by the ethical quandaries associated with gambling and tobacco companies – two conference events quickly dropped their Vectura sponsorship. But from a certain angle the takeovers of Entain and Vectura could be spun as optimistic tales of research prowess. Both are British companies that developed highly valued technology.

Yet the buyouts will surely also give pause to even the most ardent “global Britain” proponents. An open door to business is all very well, but it will again raise the question of why British companies seem to be unable to make their own way on to the world stage.



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