Acquiring established businesses is a tried and tested way to achieve rapid growth, allowing companies to get their hands on prized assets, market share and knowledge in a short space of time.
It’s especially common in tech and pharma. Both AstraZeneca and GSK are fairly regular dealmakers as they strive to bolster pipelines and expand portfolios. AZN, for example, has recently completed its purchase of biotech company EsoBiotec for up to $1bn (£745mn), in a move designed to strengthen its core oncology specialism. The Belgian firm has developed pioneering cell therapies, which help the immune system to attack cancers.
Wealth managers make far fewer acquisitions, but Rathbones’ purchase of rival Investec in 2023 enabled it to create a bigger, leaner wealth management group with the weight to take on rivals. The deal scaled it into a UK top three wealth business, with £100bn of funds under management. The London Stock Exchange’s £20bn purchase almost five years ago of data provider Refinitiv, which it saw as a complementary business to its own, utterly transformed the 300-year-old exchange.
Deals don’t have to be on a mega scale though. Testing and inspection group Intertek is buying Australian testing and analysis competitor Envirolab, which reported £28mn of revenue in the year to June with the aim of establishing itself as a market leader in the Australian environmental testing market.
British companies typically make fewer acquisitions Down Under than they do in the US or Europe, but the numbers have increased in recent years. According to data from Beauhurst, since the start of the year, British companies (listed and private) have acquired 77 US firms, 86 in Europe (including Ireland), and just 35 in Australia.
Volution Group is no stranger to the region, however. Having previously bought Australian business Ventair and New Zealand-based Simx, it spied a new and lucrative opportunity to deepen its grip on the Australasian market with its purchase of ventilation competitor Fantech last year.
BUY: Volution (FAN)
The A$281mn (£138mn) purchase of Fantech last September was the main driver behind the gains made last year by serial acquirer Volution, writes Michael Fahy.
Revenue and adjusted pre-tax profit both rose by about a fifth in the period, although like-for-like growth was still pretty solid at 5.7 per cent.
This was driven by the domestic market, where revenue growth of 9.5 per cent was driven more by refurbishment work than a still slow new-build market.
Revenue in Australasia doubled, though this was largely a result of the Fantech deal. This pushed net debt up by about £100mn to £166mn.
Volution’s shares trade at 20 times forecast earnings, or around double the level of the wider building materials market. The company has demonstrated resilience in difficult markets, though, with adjusted earnings per share increasing at a compound annual rate of about 12 per cent since it floated 11 years ago.
With an operating margin above 20 per cent and a return on invested capital north of 25 per cent, we think its premium is justified.
HOLD: Bellway (BWY)
Bellway has joined larger peer Barratt Redrow in calling for demand-side support from the government to stimulate housebuilding in the UK, writes Hugh Moorhead.
Faltering demand is making an elevated number of completions financially unviable, the company noted, with the number of first-time buyers reducing, following the end of a temporary reduction in stamp duty in March 2025 and, before that, Help to Buy in March 2023.
The housebuilder is targeting 10,000 completions in its 2028 financial year, about a 5 per cent annual increase on the financial year to July 31 2025.
The company’s announcement that it will repurchase £150mn-worth of shares over the next 12 months also suggests it has excess capital to deploy. Coupled with its 70p dividend, this implies a healthy 8 per cent total yield.
Bellway completed 8,749 new homes in the financial year, generating £222mn of reported pre-tax profit on £2.78bn of revenues. Its 2026 guidance implies a 7 per cent increase in operating profit to £326mn, estimates Anthony Codling of RBC Capital Markets.
BUY: Target Healthcare Reit (THRL)
Target is the last remaining UK-listed Reit with a portfolio mainly made up of care homes, an area of the healthcare market undergoing change, writes Hugh Moorhead.
One question facing Target is whether its £900mn portfolio gives it sufficient scale, or leaves it vulnerable to private capital. It has the firepower to bulk up after a refinancing of its debt facilities and the disposal of nine care homes for £90mn, which reduced the loan-to-value ratio of its portfolio to a mere 13 per cent.
Like-for-like rental growth increased by 3.3 per cent, with headline rent at £61.2mn. Adjusted earnings per share fell 1 per cent, however, after some one-off administrative costs. While this left Target only just covering its 5.88p annual dividend, management is still targeting a 2.5 per cent increase in the dividend next year.
Target trades on 15 times Panmure Liberum analysts’ 2026 earnings forecasts, and on a 15 per cent discount to net assets. Given the long-term visibility of its earnings and healthy dividend yield, now could be a viable entry point.
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