Overseas corporates are swooping to pick up bargain UK smaller companies, analysis by Edinburgh investment giant Aberdeen shows.
UK companies worth a combined £15 billion have been bid for year-to-date (YTD).
However, Aberdeen said that interest from overseas corporates may have helped to shrink the sizeable valuation discounts of UK smaller firms.
Most of the interested buyers are corporates rather than private equity and most are based overseas.
Aberdeen said there have been 17 corporate acquirors versus four private equity deals, with 13 overseas acquirors versus eight from the UK.
“Of the 15 transactions announced YTD, six were for FTSE 250 companies, four for FTSE smallcap firms and four for AIM companies.
“The most active sectors have been Funds, Real Estate and Healthcare.”
Previous Aberdeen research in February 2025 found that UK smaller companies were the most undervalued stocks in the world when looking at current 12-month forward price to earnings (P/E) ratios versus the 10-year average.
“UK small caps were on a discount of -23.4% to their 10-year average compared with -3.2% for global smaller companies,” said Aberdeen.
“A discount to historic levels suggests that investors can pay less now than they have done previously to get access to the same earnings potential.
“However the discount for UK smaller companies has since reduced to -14.6%. While for the MSCI ACWI Small Cap – an index of global smaller companies – it has widened to -30.3%.
“The region where smaller companies are on the biggest discounts compared with their historic average is now Asia excluding Japan (-42.9%).”
Amanda Yeaman, co-manager of the Abrdn UK Smaller Companies Fund and the Abrdn UK Smaller Companies Growth Trust plc, said: “The UK continues to be a happy hunting ground for both corporate and private equity bidders, due to low valuations and willing sellers.
“It is notable that corporates have been the main acquirors, which shows the attractiveness of UK companies and suggests confidence in the economic outlook and the interest rate environment.
“Currently there are willing buyers (attracted by the valuations available and the probability of a successful conclusion) and willing sellers. The scale of M&A and lack of IPOs is resulting in reduction in the number of UK-listed growth companies, illustrating the tension between the clear value in the market, but the shrinking asset pool …
“The UK is now a much better to invest versus other geographies than it has been for several years as US exceptionalism retreats. We have seen this reflected in improved flow data. We have a rich and diverse investible universe in the UK and are finding great investment opportunities as quality growth and momentum investors.”