By Philip Waller

LONDON--Takeovers involving companies on London's AIM junior market rose by a fifth last year against 2015 as the fall in sterling caused by the U.K.'s June vote to leave the European Union increased their appeal to overseas bidders, a report out on Tuesday showed.

The number of AIM firms acquired in 2016 rose to 34 from 28 a year earlier, according to the study by accountancy group UHY Hacker Young.

Merger and acquisition activity rose sharply in the final quarter of 2016, with 13 AIM companies being bought compared with eight in the same period in 2015.

A weaker pound following the referendum vote to leave the E.U. partly drove the rise in takeovers, with 70% of the bids in the fourth quarter coming from overseas.

The increase in takeover activity is accelerating an overall reduction in the number of companies listed on AIM, putting its future in doubt, UHY said.

Overall numbers fell by 61 to 993 in 2016 and by 41% from a peak of 1,694 at the end of 2007.

Commentators have blamed the drop on a tightening of the market's rules in 2006, the financial crisis in 2008 and uncertainty over the prospective merger of AIM's owner, London Stock Exchange Group PLC (LSE.LN), with Germany's Deutsche Boerse.

Laurence Sacker, Managing Partner at UHY Hacker Young, said: "The continued shrinkage of AIM is not great, and if this continues at the present rate, then the future of the market may be in doubt.

"It's vital AIM appears welcoming to all companies looking to raise capital, particularly to foreign companies, as after 'Brexit' there may now be a perception that London is not the place to be."

-- Write to Philip Waller at philip.waller@wsj.com

(END) Dow Jones Newswires

January 03, 2017 01:44 ET (06:44 GMT)

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