Intense bidding competition escalates as KKR presents a new bid for Spectris

In a significant turn of events, private equity firm KKR has made a fresh offer for precision instrument business Spectris, valuing it at £4.8bn. This offer outflanks the earlier bid by Advent, and the Spectris board has now recommended shareholders vote to approve the takeover.

The saga began in June when Advent made its first offer for Spectris at 3,763p per share. However, the latest offer by KKR represents a 4.4% improvement on its earlier offer of 4,000p per share, and a significant leap over Advent's latest offer of 4,100p per share.

The recommendation by the Spectris board came after KKR improved its offer. A general meeting to approve the takeover is scheduled for 22 August. If approved, Spectris would be added to a growing number of firms leaving the London Stock Exchange.

The consistent outflow of capital from domestic markets is the root cause of UK companies being more attractive to acquirers than investors, according to Charles Hall, head of research at Peel Hunt. He suggests that an urgent rethink is required to ensure that UK capital backs UK companies to help the UK equity market thrive.

The UK is seen as a hub of research excellence and scalable innovation, but market sentiment continues to undervalue these assets. This is evident in the fact that UK companies are more attractive to acquirers than investors, a trend that has been exacerbated by the consistent outflow of capital from domestic markets.

The UK's attractiveness to acquirers is not just limited to domestic players. For US corporates seeking long-term growth in capital-intensive sectors, the UK has become a natural entry point. According to Daniel Black, Vice President of Business Development at Ideals, the recent wave of US bids for UK-listed companies is due to a broader shift in the M&A landscape, with strategic acquirers targeting differentiated IP, AI capabilities, and advanced compute technologies.

Moreover, UK innovation is drawing strategic buyers due to its global relevance and integration potential, as noted by Charles Hall. This is evident in the case of Spectris, a company with a global footprint and a strong presence in the precision instrument market.

The deal, if approved, would value Spectris at more than double where it had been trading before the bidding war began. This highlights the potential value that UK companies possess, which is often overlooked by investors.

In conclusion, the bidding war for Spectris underscores the attractiveness of UK companies to acquirers, particularly in the current M&A landscape. It also serves as a reminder of the need for a rethink in the UK's approach to capital markets to ensure that UK companies can thrive and contribute to the growth of the UK equity market.