Value of M&A deals halves in five years

HOPES of a recovery in the deals market have been tempered today by new research showing the end of a rally in buyouts involving British companies.

The value of mergers and acquisitions targeting privately owned British companies has fallen by four per cent to £12.1bn.

The level of deals for the year to July 2011 is now little more than half of the £24bn racked up in 2006-07, according to accountants UHY Hacker Young.

Chris Lowry, partner at UHY Hacker Young, said: “We are seeing no shortage of business owners looking to exit but potential buyers are sitting on their hands. Buyers are either nervous about buying a company whose business might deteriorate as the economy stagnates or they think that if they wait longer prices might fall further.”

The slowing deals market prompted much agonising at the top of the private equity industry late last year with Terra Firm founder Guy Hands describing current conditions as the “wilderness years”. Similarly Lionel Assant, Blackstone’s senior managing director in private equity, said $20bn (£12.8bn) deals may be gone for five years or forever.

UHY said, however, that many of the largest M&A deals for privately-owned British companies involved private equity bidders.

“Whilst the perception is that the private equity market is suffering the reality is that they are active relative to trade buyers,” Lowry said.

“This may be because private equity firms have funds that need to be invested or it may be that they are just more motivated to buy when they see prices are cheap.”

FAST FACTS | M&A ACTIVITY
● Government spending cuts and Eurozone turmoil were blamed for hitting the initial recovery in unlisted M&A deals in 2009-10

● Bank lending to private company M&A deals still difficult to obtain, UHY Hacker Young says