Private equity's big-money deal for Spectris points to wider problems with the UK markets

This shouldn't happen in a well-functioning stock market: a grown-up industrial company, listed in London since 1988, with revenues of £1.3bn last year and pre-tax profits of £191m, is being taken out by private equity at a 96% premium to the pre-action share price.

- Nils Pratley

This shouldn't happen in a well-functioning stock market: a grown-up industrial company, listed in London since 1988, with revenues of £1.3bn last year and pre-tax profits of £191m, is being taken out by private equity at a 96% premium to the pre-action share price. How can a business be worth twice as much in private hands than on the public markets?

The company is Spectris, a low-profile but high-quality FTSE 250 maker of precision instruments and testing equipment used in everything from food manufacturing to automotives. The buyer is KKR with an agreed offer of £4.1bn that beats fellow US private equity house Advent's £3.8bn offer last week.

The detail of the bidding, as revealed in yesterday's documents, is a tale in itself. The board of Spectris had turned down two previous approaches from KKR, starting at £30.25 a share, and five from Advent, before accepting the latter's £37.63. Now KKR has come over the top at £40 a share.

The impression is of private equity firms salivating over the target while the public markets sleep. The caricature of the London market as a risk-averse place of capital drift is roughly accurate.