A surge of mergers and acquisitions and corporate actions impact investment firms in first six months, reports AIC

Investment company mergers, acquisitions, and corporate actions have been on the rise in the UK investment sector during the first half of the year. The Association of Investment Companies reported a record-breaking 17 instances of mergers, acquisitions, and liquidations during this period, signifying a significant amount of change and restructuring in the London-listed closed-end funds industry.

Describing this rapid pace of contraction in the sector, the AIC likened it to a “whirlwind” of activity. The numbers speak for themselves, with four investment company mergers, four completed acquisitions, and 11 listed funds that liquidated in the first half of the year. In addition, share buybacks surged by 32% to £4.8bn as boards sought to narrow share price discounts and provide capital back to shareholders who were dissatisfied with their returns.

Despite the tumultuous nature of these developments, there have been positive outcomes. By the end of June, the average investment company, excluding 3i Group, was trading at a 13.9% discount to net asset value, an improvement from the 15.3% average discount observed at the close of 2024. Moreover, 19 investment trusts adjusted their fees, and two appointed new managers following shareholder pressure to address underperformance.

AIC Chief Executive Richard Stone highlighted the flurry of activity, noting, “It has been a whirlwind half-year even exceeding the busy first half of 2024. There have been 17 mergers, acquisitions, and liquidations, versus nine in the same period last year, and share buybacks are nearly a third higher.” Boards have been actively engaging with shareholders and exploring all available options to enhance shareholder value, including fee adjustments to benefit investors.

The list of investment trusts affected by these changes in the first half includes Asia Dragon, Henderson International Income, Care Reit, BBGI Global Infrastructure, Harmony Energy Income, and Urban Logistics, among others. Noteworthy acquisitions included Asia Dragon’s merger with Invesco Asia to form Invesco Asia Dragon and Henderson International Income’s absorption by JPMorgan Global Growth & Income.

The significant number of liquidations in the market also made a notable impact. Some ceased operations included Blackstone Loan Financing, Doric Nimrod Air Two, and Henderson Opportunities, indicating a widespread shift in the investment landscape. Henderson Opportunities and Keystone’s decisions to wind down came after successfully warding off activist attempts to seize control of their operations.

Overall, these developments reflect a period of dynamic change and reorganization in the investment sector, showcasing the resilience and adaptability of companies in response to market pressures and shareholder demands. The winds of change seem to be blowing strong in the UK investment landscape, with companies taking proactive steps to enhance value and performance for their investors.