Takeovers are gathering pace, with many involving foreign companies seemingly keen to take advantage of cheaper valuations on the UK market.

We see a common theme across the deals – bid targets are either businesses that have reached a point in their career where future growth might be hard to achieve on their own, or businesses that believe they would be more successful as part of a larger group.

A £7.2bn offer for UK insurer RSA (RSA) from a consortium of Danish insurer Tryg and Canada’s Impact Financial represented a 50% premium to the market price before the news came out.

The continuing consolidation of the insurance industry and need for scale appears to be one of the factors behind the move, although no doubt valuation also played a part, with the shares trading on a single-digit price to earnings ratio before the news became public.

RSA had become a more profitable business by selling the weaker parts of the group, but it faced a big hurdle in trying to grow on its own.

Racing car developer and publisher Codemasters (CDM:AIM) is in favour of selling itself to US gaming products company Take-Two Interactive Software. The share and cash approach, equal to 485p per share, represents a slender looking 11.5% premium.

The news took the market by surprise as Codemasters seems to be having a lot of success on its own. Take-Two argues it can bring benefits to Codemasters’ performance leveraging its global distribution and core operating expertise in publishing.

Shore Capital believes the company’s unique position in the market, key relationships and upward growth trajectory puts it in a strong position to secure future growth by itself. It highlights China’s Tencent and US firm Activision Blizzard as other potential suitors.

The structure of the offer which comprises 120p in cash and 0.02834 new Take-Two shares per Codemasters share may complicate matters for some UK shareholders, opening the prospect for an all-cash deal to win  the day.

Biotechnology is another area bubbling with M&A activity as exemplified by venture capital firm Arix Bioscience (ARIX) receiving a $2.75 billion cash bid for portfolio company VelosBio from US giant Merck last week. The sale is expected to deliver a 12-times return on Arix’s original £12 million invested capital.

A few days before, Horizon Discovery (HZD:AIM) received an all cash 185p per share offer from US firm PerkinElmer at a 108.3% premium while blood flow monitoring company LiDCO (LID:AIM) received an all-cash offer of 12p per share representing a 77.8% premium from Nasdaq-listed Masimo Corporation.

The strategic rationale in the latter two cases seems to be based on gaining quicker access to global distribution opportunities and accelerating commercial development.

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