Mergers on Hold as Recession Bites; Acquisitions

The Birmingham Post (England), January 12, 2009 | Go to article overview

Mergers on Hold as Recession Bites; Acquisitions


Byline: TOM SCOTNEY Legal & Finance editor

New figures have shown the extent to which the world of financial deals has crashed in the Midlands over the last few months as a result of the global financial freeze.

Merger and acquisition activity in the Midlands fell to the lowest ever recorded level at the end of last year, according to market analysis group Experian.

Its Corpfin research group found the deals done in the region in the last three months of 2008 were worth a total of just pounds 878million - the first time a quarterly figure had dropped below pounds 1billion and the lowest amount since their records started in 1994.

Only 120 deals were done in the region during the last three months of the year, a drop of nearly 20 per cent on the quarter before. As a whole 2008 saw only 620 M&A and IPO deals announced, significantly lower than the 863 completed the year before.

Just one large deal worth more than pounds 100million was completed in the last few months of 2008 - the move by German aviation firm Lufthansa to take a controlling stake in rival carrier British Midland. This compares with the 2007 pounds 8 billion takeover of Hanson plc (right) by Heidelberg Cement AG. This was the second lartest deal carried out in the Midlands since the turn of the century Corpfin strategic consultant Brian Rarity said: "Given the scale of the economic downturn, it's no surprise that deal volumes and values are down for 2008.

Importantly, however, deal activity has not stopped altogether and Q4 2008figures should be considered as a comparator for Q1 2009 performance.

"The move into 2009 brings the psychological benefit of a re-start, with confidence most in need of a timely boost."

The best-performing financial advisers in the Midlands last year was Grant Thornton, who completed 33 deals in 2008. Corporate finance partner Phil Jackson described the year as a "roller-coaster", but said there were some encouraging signs the bottom of the downturn was approaching.

He said: "The fourth quarter of 2008 was hopefully a watershed. We want to get some sort of reversal in 2009, even though we know the deals will be at lower values.

"What we saw last year was a roller-coaster.

At the start of the year M&A was extremely busy, partly driven by changes to capital gains tax, so there was a plethora of private company sales before then. Broadly speaking they were done under the previous economic climate.

"Contrast that with the last quarter, which has probably been the quietest one for many many years, and that's really driven by the fact that as the year went on confidence has waned, and the price purchasers were prepared to pay has skewed significantly. …

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