Foreign opportunists are turning Britain into a corporate car-boot sale

The snatching of a 12 per cent stake in BT by French entrepreneur Patrick Drahi, last seen here when he bagged Sotheby’s for $3.7 billion two years ago, could be a good thing if it injects dynamism into the telecoms giant’s late-running plans to install high-speed broadband across the UK. But it’s also part of a wave of fast–moving foreign money hunting undervalued UK assets — which is positive if it fuels capital investment for growth, negative if it makes nothing but fast bucks for private investors.

The logic is simple. The private equity fraternity is laden with cash and global in outlook; what it sees in London is an appetising menu of companies trading on average earnings multiples of around 14 times, compared with roughly 23 times in the US. Their opportunism is focused on mid-range listed UK firms, rather than BT’s FTSE 100 cohort: more than 90 such deals, worth £20 billion, have been booked so far this year.

Recent targets include the AA; security provider G4S; Vectura, which makes medical inhalers; and John Laing, the infrastructure investor. And it’s not all about Americans looking for bargains with more upside potential than they can find at home: the French have quietly bought our building materials industry, while the Chinese are prowling for anything that owns mineral rights or high-tech intellectual property.

Should we care, or is this just one more example of financial Darwinism at work? The Daily Mail rages against private equity players as ‘City plunderers’ and it’s not easy to cite counter-examples in which investee companies have gone on to greater glory. One thing’s for sure: if ministers tell us this trend is ‘a massive vote of confidence in global Britain’, reach for a pinch of salt. It’s more like a giant corporate car-boot sale.