Eurozone crisis pushes mergers and acquisitions to record low

Tim Wallace
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MERGER and acquisition (M&A) activity plummeted in the first quarter, official figures showed yesterday, as nervous firms slashed spending in the UK and abroad.

UK firms spent just £0.7bn on acquisitions abroad in the first quarter, according to data from the Office for National Statistics (ONS) – down 94 per cent from £12.6bn in the final quarter of 2011 and the lowest quarterly level since records began in 1987.

“Concerns relating to the Eurozone sovereign debt crisis and confidence in economic growth are likely to have played their part,” said the ONS.

The value of acquisitions in the UK by foreign companies also collapsed, falling from £12.4bn in the final three months of 2011 to £3.9bn in the first quarter of this year.

The rot also extended to the domestic market – the value of acquisitions in the UK by other British firms fell from £1.8bn to £1.1bn in the same period.

Although the Eurozone crisis is pushing down transaction levels, analysts believe there may be something of an improvement towards the end of the year.

“We are seeing activity levels begin to pick up now, which should translate to higher figures in the third quarter,” said Deloitte’s Tom MacDonald. “In part that is down to banks divesting assets as the deleverage or are forced to slim down by regulators.
“In the longer term, Basel III’s higher capital requirements will also push banks to divest more non-core assets, supporting M&A activity.”