Why are so many UK companies being taken over? Takeovers and private equity explained

Short answer: In 2026 a large number of London-listed companies have agreed to be bought, many of them by private equity firms or by bigger rivals. By late July there had already been eleven bids worth at least £1 billion each, including £3.1 billion for the facilities group Mitie and about £5.7 billion for the FTSE 100 energy group DCC. The main reason analysts give is value: many UK shares look cheap compared with similar firms abroad, so buyers can pay a large premium and still expect a good return. [1][2]

What is actually happening

A takeover (also called an acquisition) is when one business buys control of another, usually by buying more than half of its shares. A merger is when two businesses agree to join together to form one new business. In a takeover of a listed company, the buyer usually offers shareholders a price above the current share price. The extra amount is called the premium.

Two deals from July 2026 show the pattern clearly:

• Mitie, which provides cleaning, security and maintenance services to offices, hospitals and government buildings, agreed to be bought by its rival OCS. The deal values Mitie at £3.1 billion. OCS offered 218.5p per share plus a final dividend of up to 3.1p, a premium of 44.7% on Mitie's closing share price on 20 July. Mitie's shareholders approved the deal in October 2026; it still needs UK competition approval and is expected to complete in early 2027. [1][3][7]
• DCC, a FTSE 100 energy group, agreed a takeover worth about £5.7 billion from a group led by the US private equity firm KKR and Energy Capital Partners. The offer was about £65 per share in cash, a 24% premium to the share price before the offer period began. Some large investors, including Aviva and Fidelity International, said at the time that the price was too low. [2]

The Mitie deal was the London Stock Exchange's eleventh takeover worth at least £1 billion in 2026. Data from the investment platform AJ Bell put the average premium offered by buyers in 2026 at between 43% and 45%, and Aberdeen Investments said the number of companies in the FTSE All-Share index had fallen by 11% in five years. [1]

The theory: why would anyone pay over 40% more than the share price?

A share price is the market's view of what a company is worth today. A buyer pays more only if it believes the company is worth more to it. Business theory gives several reasons.

• Undervaluation: analysts quoted by City A.M. link the wave of deals to a "valuation gap": similar companies are valued more highly in other markets. [1] If a buyer thinks the market price is too low, a premium can still be a bargain.
• Economies of scale: when two similar firms combine, they can share head offices, systems and buying power, so the cost of each unit of output falls. OCS buying Mitie is an example of horizontal integration, which means joining with a firm at the same stage of production in the same industry.
• Market power and market share: a bigger firm can win larger contracts and negotiate better prices with suppliers.
• Private equity returns: a private equity firm uses money from investors (and often borrowed money) to buy companies, change how they are run, and sell them later at a higher value. Taking a company off the stock market means it no longer has to report to thousands of public shareholders every few months.

Who wins and who loses?

This is a stakeholder question. A stakeholder is any person or group affected by a business's decisions. Different stakeholders see a takeover very differently.

• Shareholders usually gain in the short term, because they are paid the premium. Mitie's board said the offer was an attractive outcome for shareholders. [3]
• Employees may face uncertainty. Combining two firms to gain economies of scale often means removing roles that are duplicated.
• Customers might get a stronger supplier, or might face less choice and higher prices if competition falls.
• The UK economy and the London stock market lose listed companies. Some commentators worry that, if the trend continues, London will run out of good companies for investors to buy. [1]

There is also a risk for the buyer. Many takeovers fail to create the value they promise, because of culture clashes, integration problems, or because the buyer simply paid too much. When a deal is financed with large loans, the combined business also carries more debt and more risk if profits fall.

How this links to your exam

A-levels are the main UK qualifications taken at age 16 to 18. Takeovers appear in every major A-level Business course, usually under business growth and strategy.

• AQA A-level Business: AQA's new course (7137 for AS, 7138 for A-level) starts first teaching in September 2026, with first AS exams in 2027 and first A-level exams in 2028. [4] AQA's published draft of the specification places methods of growth, including mergers and acquisitions, in its strategy content, and lists private equity as a source of finance. [5] Students taking AQA's older course (7132), which has its last exams in June 2027, can use the same examples.
• Pearson Edexcel A-level Business (9BS0): Theme 3 includes 3.2.2 Mergers and takeovers (reasons, horizontal and vertical integration, financial risks and rewards) and 3.4.3 Shareholders versus stakeholders. [6]

Assessment objectives (AOs) are the skills examiners give marks for. On Pearson Edexcel 9BS0, application (AO2) is worth 22 to 24% of the qualification, analysis (AO3) 28 to 30% and evaluation (AO4) 26 to 28%, while knowledge (AO1) is 20 to 22%. [6] So most marks go to using knowledge, not repeating it. A real case like Mitie helps with all three:

• AO2 (application): use a real figure, such as the 44.7% premium or the £3.1 billion value, and link it to the business in the question.
• AO3 (analysis): build a chain: horizontal integration, so shared costs, so lower average costs, so higher profit margins, so the buyer can justify the premium.
• AO4 (evaluation): weigh it. Does the gain depend on cost savings that may never happen? Which stakeholder's view matters most, and why?

Questions on this topic often use command words such as explain, analyse, assess or evaluate. Assess and evaluate questions need a clear judgement.

CC practice question: Evaluate whether a takeover by a larger rival is likely to benefit the stakeholders of a UK facilities management company.

CC worked paragraph: For shareholders, the takeover is clearly beneficial in the short term, because they receive a premium on the share price, as Mitie's shareholders did when OCS offered a 44.7% premium. For employees the picture is less certain. Because the two firms do similar work, the combined business can cut duplicated costs such as head-office roles, which raises efficiency but may reduce jobs. Customers may gain from a larger, more stable supplier, but if the merged firm faces fewer competitors when bidding for contracts, prices could rise over time. Overall, the takeover is most likely to benefit stakeholders as a whole if the savings come mainly from shared systems and purchasing rather than job cuts, and if competition in the market stays strong. The key factor is how the new owner chooses to run the business after the deal.

How CC approaches this

The Criterion Method starts from what examiners reward: a real-world anchor, a clear chain of analysis and a judgement that answers the question. Students also learn in different ways, and the Academic DNA diagnostic helps show whether you work best from case studies, diagrams or discussion. For the theory behind this post, see the CC library pages on stakeholders and strategy and planning. The Inner Academy goes further into current business cases like this one.