UK shares have performed well in 2024, with both the FTSE 100 and the FTSE 250 up for the year. But investors shouldn’t underestimate the extent to which this has been the result of acquisitions.
Opportunistic companies – both in the UK and the US – taking advantage of low valuations has caused some stocks to jump. And I think this could well be a source of outsized returns in 2025.
Acquisition season
It’s been quite the year for acquisitions. And this has driven share prices higher on both the FTSE 100 and the FTSE 250.
News of a takeover sent the Hargreaves Lansdown share price up 53% in 2024. The transaction hasn’t been completed yet, but investors who owned the stock in January stand to do very well when it does.
On the FTSE 250, Britvic is also set to be acquired. As a result, the share price is also up 53% since the start of the year, with the deal set to complete in early 2025.
By itself, the possibility of the share price getting a boost as the underlying business gets acquired isn’t a reason to buy any stock. But it’s something investors should be aware of as part of an investment thesis.
Anglo American
Anglo American‘s (LSE:AAL) in the process of restructuring. It’s selling off its diamond, platinum, and coal operations, to focus on iron ore, copper, and fertiliser.
Since I’m much more optimistic about the outlook for copper than diamonds, I see this as a good move. But concentrating the portfolio does increase the risk of a downturn in industrial metal prices.
Unfortunately, shrinking the business probably makes it an easier acquisition target. And with BHP attempting a takeover earlier this year, I wouldn’t be surprised to if it happens in 2025.
As a shareholder, I’d rather have the long-term profits from copper mining than a quick cash return. But I’m alive to the possibility of Anglo American not being a member of the FTSE 100 this time next year.
McBride
At the other end of the scale, McBride (LSE:MCB) isn’t even big enough to get into the FTSE 250. But as the leading manufacturer of private-label cleaning products, it’s a big deal in its own way.
That however, isn’t what catches my attention – manufacturing can be a difficult business if inflation picks up. I’m more interested in its brands, which include Oven Pride and Surcare.
I think these could be valuable for a firm like Unilever or Reckitt and I wouldn’t be hugely surprised to see something happen here. Whether they would go for the private label division’s another question.
Unlike Anglo American, I haven’t heard news of a potential McBride takeover. But it wouldn’t surprise me to see some interest emerging next year.
Buy now before it’s too late?
I own shares in Anglo American, but not in McBride. But the possibility of a takeover doesn’t factor heavily in my thinking, in either case.
Attempting to get ahead of a potential acquisition is a risky business. So while it could pull UK stocks higher in 2025, I’m not counting on it for my own portfolio.
