UK M&A 'on fire' as large caps simplify and overseas buyers target cash-generative assets, says Citi CEO

U.K. M&A is running hot, driven by large-cap companies simplifying their businesses and overseas buyers targeting cash-generative British assets, Citi U.K. CEO Tiina Lee has told CNBC.

Speaking with CNBC's "Squawk Box Europe" in Canary Wharf Thursday, Lee said M&A was "on fire," pointing to an ongoing push by major companies to streamline portfolios and focus on core operations.

"It's being driven by the ongoing theme around U.K. plc simplification," Lee said, referring to a trend among large-cap companies that are streamlining their business models.

She highlighted the transaction involving McCormick and Unilever's food business, as well as Diageo's sale of its Indian cricket team, as examples of companies sharpening their focus around core competencies.

Lee added that foreign investment into the U.K. has also been strong, with 28 transactions announced so far this year, particularly targeting businesses with solid cash flows and international profiles. At the same time, U.K. companies are continuing to invest overseas, she added, noting Rosebank's acquisition of MW Components earlier this year.

"All of this is focused around large caps focusing on their core competencies," she added.

The strength in dealmaking stands in contrast to a quieter IPO market, Lee said, with M&A currently providing the main momentum in U.K. capital markets.

A key driver is the valuation gap between the U.K. and U.S., she said, adding that well-established British companies with strong cash generation and resilient business models remain highly attractive to international buyers.