Companies with aspirations for growth and market dominance are often on the lookout for takeover opportunities, a strategy that has become particularly scrutinized in todays business climate. While some takeovers may result in negative consequences for consumersespecially when the aim is to eliminate competition or absorb a startups innovative ideas, a practice frequently attributed to U.S. tech giantsthe motivations behind these acquisitions arent exclusively monopolistic. Often, the intent is to create a more formidable entity by merging strengths. A case in point is Volexs recent attempt to acquire its smaller competitor, TT Electronics, a move that reflects a broader strategy in the industry.

Both Volex and TT Electronics operate in the electrical components sector and share a rich heritage in traditional manufacturing. Over the years, both companies have successfully diversified into new markets and expanded their production and sales on an international scale. However, Volex has outstripped TT Electronics in terms of growth and market performance. In recent years, TT Electronics has faced numerous macroeconomic challenges and production setbacks, particularly in its U.S. operations. Despite these adversities, the board of TT Electronics made the decision to reject a 250 million bid from Volex, believing they could resolve their own issues.

This scenario is not unique; numerous companies have rebuffed what they considered unwanted takeover bids, convinced they could overcome their operational challenges. For instance, mining giant Anglo American turned down acquisition proposals from BHP and subsequently undertook a significant restructuring process. Similarly, the property portal Rightmove declined several offers from Australian firm REA, while the electronics retailer Currys also resisted takeover attempts last year, managing to bolster its position instead. In another case, the engineering firm Wood Group previously rejected bids, including one worth 1.6 billion, opting instead for an internal overhaul. However, recent developments forced Wood Group to accept a bid of 242 million, along with additional financing to manage its debts.

Despite ongoing efforts to revitalize its operations, TT Electronics encounters persistent issues, with new tariffs adding further complications to its recovery strategy. If the company successfully navigates these challenges, there is considerable upside potential for its stock. However, speculation about further acquisition bids remains on the horizon, particularly in light of the current trading environment.

According to Arthur Sants, TT Electronics shares have suffered significantly as a result of U.S. tariff policies. The decision to reject Volexs acquisition offer, which valued the company at 135.5 pence per share, may become a point of regret. At the time the bid was made, the offer was below TT Electronics historical averages, and analysts were optimistic about a rebound in its performance. Unfortunately, the unforeseen emergence of a tariff war loomed large over the companys prospects.

TT Electronics specializes in manufacturing electronic components, such as sensors and fuses, catering to industrial manufacturers around the globe. The introduction of tariffs, therefore, poses a significant threat. The company's management noted that these tariffs have raised concerns over their ability to meet certain financial covenants under extreme scenarios.

The past year was particularly challenging for TT Electronics; for the fiscal year ending December 2024, adjusted revenue plummeted by 15%, while soaring supply chain inflation led to a 21% decline in operating profit, which fell to 37.1 million. Consequently, the board made the tough decision to pause its final dividend payout.

Navigating the North American market proved especially tough, with reported revenue dropping by 17%. While management indicated a 10% increase in order intake last year, they cautioned that substantial revenue growth in 2025 remains unlikely. In contrast, Europe emerged as a bright spot, with organic revenue rising by 14%, largely due to increased demand in the aerospace and defense sectors. The outlook for 2025 appears optimistic for Europe, especially with renewed commitments to defense spending.

Despite TT Electronics currently being valued below its net assets, there is a compelling argument for supporting its European operations. However, the risk of encountering a value trap persists, prompting the recommendation to re-evaluate investment strategies.

Meanwhile, WHSmith, a company that has been a fixture on the UK high streets for over 230 years, announced a strategic exit from its high street retail operations, a move lauded by industry analysts. This decision reflects a long-standing trend where management has increasingly focused on the more profitable travel retail segment. The high street division had shown signs of deterioration, and the results of the latest financial period reveal the extent of this decline.

In the sale process, WHSmith disclosed that it would only receive approximately 25 million from the sale to private equity firm Modella Capital, after accounting for separation and transaction costs. These costs, alongside over 60 million in impairments related to the high street operations, contributed to a pre-tax loss of 42 million, in stark contrast to a profit of 28 million from the previous year. The underlying pre-tax profit remained flat at 44 million, aligning with market expectations.

Managements decision to sell the underperforming high-street arm seems justified by the recent financial results, which showed a 7% drop in revenue from that division, contrasting with a 6% uptick in the travel business. Trading profit from the travel segment surged by 12% to 56 million, while that of the high street plummeted by nearly a third to 15 million. Analysts have observed that management was investing about half of their time on a business that only generated roughly 20% of the group's profits, making the disposal a strategic move to enable greater focus on expansion and growth prospects. Currently, WHSmith has a pipeline of 90 new stores, with plans to open 60 this year, despite also closing 50 smaller outlets.

While the high street business transitions to a new operator, it is expected to benefit from more focused management. However, investors will likely shift their attention away from it once the deal is finalized. After the sale, WHSmith is poised for improved margins and a healthier balance sheet, alleviating some of the financial burdens it has been carrying.

In the wake of the deal, WHSmiths stock experienced a slight dip, largely due to investor concerns that a more confrontational U.S. administration could deter tourism, impacting its travel business in the longer term. Nevertheless, analysts suggest that the company is positioned for a re-rating once the market fully absorbs the implications of the sale.

Additionally, Everyman Media has recently reported a widening pre-tax loss while simultaneously experiencing an uptick in market share. Despite these challenges, CEO Alex Scrimgeour expressed optimism about a strong performance in 2025, supported by a diverse range of forthcoming films. The company experienced a notable surge with the release of Bridget Jones: Mad about the Boy, which positively impacted attendance figures.

Although the annual results reflected the challenges flagged in a prior profit warning, the cinema operator reported a flat adjusted cash profit of 16.2 million, influenced by rising wage costs and higher utility expenses. Despite these pressures, demand remained robust, with total admissions soaring by 15% to 4.3 million, aided by the opening of three new venues. Membership numbers also surged by over 65%, reaching approximately 56,500, and market share improved by 13% to 5.4%.

Everyman continues to expand its footprint, having opened a new cinema in Brentford earlier this year, with plans for a new site in Bayswater set to debut in the third quarter. The increasing ownership stake of private equity firm Blue Coast Capital, which now holds more than 29% of shares, raises the possibility of a future takeover offer, making Everyman a company to watch closely. Currently, Everyman trades at only seven times the earnings forecast for 2026, which prompts speculation that the shares may be undervalued, particularly since they have plummeted by more than half since their listing in 2013.