A study of 1,500 executives surveyed in August and September by Ernst & Young reveals interest in M&A deals has fallen among senior executives from 52 per cent to 26 per cent year on year.
Low confidence in the business environment and a wedge between what buyers are expecting to pay for businesses are the two main reasons behind the M&A freeze.
“The economy is a huge negative factor,” said Rhys Phillip, a senior partner in corporate finance at E&Y. “M&A is risky, it’s not like putting your money into the bank and knowing what you’ll get back. That’s why you have seen the proliferation of share buy backs instead of M&A, shareholders are risk averse.”
The E&Y study also reveals those looking to do a deal want to stay at the lower end of the market. Half of those hoping to do deals were for ones worth $50m (£31.2m) or less, despite good valuation data.
Mark Gregory, E&Y chief economist, said: “Our analysis suggests that deal volumes are 30-40 per cent below the level we would expect given current stock market valuations.”